EOnation: Summary of COG National discussion to date

["Jacquelyn Yates" <Yates@salem.kent.edu>]

Dear COG Discussants of "National Policy on Employee Ownership,"  Following for 
your comments is a one-page summary of my paper on the topic of our discussion 
group.  When I took on this task, I was very new to the subject matter, and I 
made a lot of mistakes.  Thanks to all those who have helped me to learn.  I 
have read a lot, too, but I still don't feel confident in my knowledge, so 
further corrections are very very welcome.  I left out the fireworks on binary 
economics, because they have their own group now.  I would appreciate your 
comments as to tone, direction and factual accuracy. 

National Practices in Employee Ownership: Summary 

            Worldwide, employee ownership is on the increase.  It is taking 
hold in North America and Europe.  It was
            launched like a powerful rocket in the former Soviet-style 
economies, and some survivors will emerge from the
            rocket’s crash.  Asian communities and governments are 
experimenting with it, and Japan’s substantial
            employee ownership program dates from the 1960’s.  In developing 
countries, it is seen mostly in the form of
            cooperatives, which have been actively promoted by aid donors.  The 
idea is popular with both traditional left
            and traditional right, although the two sides have somewhat 
different ideas about how employee-owned firms
            should be structured and managed. 

            The concept of employees owning part or all of the companies where 
they work is simple, but the application
            is exceedingly complex.  National law and practice is varied in the 
extreme.  Each country has a distinct style
            of employee ownership, with a mix of laws, regulations, 
institutional forms and informal practices unique to
            itself.  The chief possibilities include basic cooperatives of 
independent producers, labor cooperatives (which
            own their enterprises collectively), associations of cooperatives, 
direct ownership of firms by unions,
            ownership of stock by union pension funds, employee stock ownership 
trusts, employee stock ownership
            (pension) plans, employee savings accounts, workingmen’s funds 
(collectively-owned portfolios of their
            employers’ stock), direct stock purchases by employees, stock 
options, deferred profit sharing paid in
            company shares, and labor banks.  Even this lengthy list is not 
exhaustive.  In the author’s experience, the
            ingenuity of humans at developing their own special way of 
organizing economic activity has no limit.   

            Research on usefulness and best context for the various forms and 
practices is in very short supply.  And yet
            with steady increases in the extent of employee ownership, there is 
a need for deeper and more thoughtful
            understanding.   Scholars and policy makers in similar countries 
could benefit immediately from more exchange
            of ideas and understanding.  The need for such understanding 
constitutes an urgent necessity in the former
            centrally-planned economies.  An examination of employee ownership 
from a world wide perspective would
            help to develop a better idea of what kinds of ownership structures 
are best suited to particular cultures and
            stages of economic development.  There is a need for simple data 
collection to begin the process.   

            Even without better information and more subtle understanding, some 
priorities for national policy are
            clear.  Support organizations are needed to assist employee-owned 
business in developing effective
            self-management.  These should help firms to educate their owners 
and exchange information about useful
            structures and practices.  Small investments of public money for 
support can generate large returns in retained
            jobs, anchored capital and faster economic growth.  Another need is 
access to capital. Employee owned firms
            need loans for buyouts and investment comparable to what other 
kinds of business have.  National policy
            could help through loan guarantees, a revolving loan fund, or tax 
expenditures to make traditional bank lending
            more attractive.   Appropriately trained management talent is 
essential for the success of employee owned
            firms, no less than other kinds of business, and leadership of 
employee-owned business requires the cultivation
            of special skills and qualities.  Governments can fund such 
programs.   National policy can also help by
            favoring employee ownership in one-time events like privatization 
or emergency takeovers, but these should be
            structured so that there is a realistic possibility that employee 
ownership will result, unlike the voucher
            privatization programs used in the former Soviet economies. 

--
Jacquelyn Yates, Ph.D.                
Political Science                                   
Kent State University - Salem         
2491 S.R. 45 South     
Salem, OH 44460

yates@mail.salem.kent.edu
FAX  330-332-9256 
Tel. 330-337-4282



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