Virginia Privatization and Employee Ownership

["Chuahy, Rafaella B." <rchuahy@fed.org>]

Hi all,
 
If you want to find out more about Virginia's efforts towards employee
ownership, a good source is the report entitled "Secretary of Administration
and the Commonwealth Competition Council on Methods to Privatize Appropriate
State Government Functions through the Development and Promotion of
Employee-Owned Companies." 
Copies of the report can be obtained by writing the Commonwealth Competition
Council, P.O.B. 1475, Richmond, VA 23212. 

-----Original Message-----
From: Timothy Regnitz [mailto:tregnitz@bcigroup.com]
Sent: Thursday, October 07, 1999 9:33 AM
To: 'EOpriv@cog.kent.edu'
Subject: RE: unions, EO & privatization



Did you get this? 

Tim Regnitz     
Principal       
BCI Group       
1-800-705-4964 
tregnitz@bcigroup.com 

        -----Original Message----- 
From:   Timothy Regnitz [SMTP:tregnitz@bcigroup.com] 
Sent:   Thursday, October 07, 1999 8:20 AM 
To:     'EOpriv@cog.kent.edu' 
Subject:        RE: unions, EO & privatization 

        Unions have large pension plan that invest in assets not limited to
large publicly traded U.S. corporations. Why not use some of that cash to
fund employee buyouts in companies where unions are present or have union
membership a requirement for the loan? What's best for employees in the 21st
century is ownership......most likely at the majority level. 

        Tim Regnitz    
Principal      
BCI Group      
1-800-705-4964
tregnitz@bcigroup.com 

                -----Original Message-----
From:   Dan Bell [SMTP:dbell@kent.edu]
Sent:   Wednesday, October 06, 1999 12:25 PM
To:     EOpriv@cog.kent.edu
Subject:        Re: unions, EO & privatization 

                Hello fellow EOPRIVers! 

                I would like to add a thought to the discussion going on
about the role of unions in companies with employee ownership.
>From my point of view, this is relevant to the discussion on
Employee Ownership in Privatization, because state-owned
enterprises often have employees represented by unions and
this can have an impact on the process. 

                The union role can be divided into two areas here.
1. Union role vis-a-vis the process of privatizing
2. Union role in the employee-owned company after
   privatization has taken place 

                Regarding #2 (the post-privatization role), the union
role is no different than in any other company making a
transition from conventional to employee ownership.
A. Protect the individual members: Unions are the
   judicial branch which protects the rights of individuals
   before the awesome power of the executive branch
   (management). Even where management is accountable
   to the workers as shareholders, as are our government
   officials to the voters, an individual worker or
   voter still needs judicial protection.
B. Organize the workers' ownership into a coherent
   voting block. Where workers are merely individual
   and unorganized shareholders, their interests can
   be divided and conquered.
C. Develop an ownership culture among workers: Together
   with management, union leaders can oversee the
   establishment of an employee involvement structure,
   and an ownership education and training program,
   which helps workers develop the new skills and
   knowledge to act as owners. 

                Regarding #1 (privatization process role), the union's
role is to protect its memberships' interest, and seek
the outcome which is best for its membership.
At a macro-level, the union should influence laws which
establish the ground rules for privatization which give
employees the opportunity to participate in the new
ownership structure in a meaningful way.
At a micro-level this could be:
A. Fight privatization: The taxpayer/voter can be convinced
   that the service provided is appropriately subsidized with
   tax dollars. There are three interests at stake: taxpayer,
   consumer, worker. These three groups overlap but are not
   identical. If the taxpayer stops subsidizing, this cost
   is either passed on to the consumer (pays more out of pocket
   or loses the service), or to the workers (reduced number
   of jobs or reduced wages and benefits or both).
B. Accept the inevitable and seek the best outcome: If the
   taxpayer/voter cannot be convinced to subsidize, then the
   government will stop providing the service. The union
   can:
 1. Oversee a feasibility study which shows how the new
    private company will provide the service at a price
    which the market will support. Once the amount of total
    probable revenue is identified, then the union has to
    maximize the share which its members will get.
 2. Negotiate the tough choices. In all likelihood, this total
    will be less than what it was before because the
    taxpayer subsidy is gone. To maintain the previous
    level of income for all the members, the new company
    will have to both get more output from each worker and
    expand its activities to generate greater sales.
    Otherwise, the smaller pie will mean that the current
    employees are kept at the current level of productivity
    and wages are reduced, or the current workforce is
    reduced and and the current level of productivity is
    increased. Part of this equation can include the
    additional income / capital acquisition which can
    come from an ownership stake either gifted to employees
    by the state or acquired by the employees with credit
    made accessible to employees by the state.
 3. Negotiate a voice in the long term strategy of the
    company. One possibility is majority employee ownership,
    but depending on co-determination laws in a particular
    country, this may not be the only option.
 4. Negotiate the ability of the union's membership to
    acquire capital in the privatization deal. This can
    include the gifting of some or all of the state's
    ownership to employees (a taxpayer subsidy), and/or
    providing the employees with access to credit to
    purchase the enterprise at a market price (one which
    can be repaid out of the future earnings). At a
    minimum, any enterprise capital to be financed out
    of future earnings should be sold to the employees
    (and possibly the broader community). The only reason
    to seek private investors should be where additional
    investment is needed for expansion, modernization, etc.
    Just as the employees are getting a market return on
    the value of the existing assets in order to repay the
    acquisition loan, the private investor should get a
    market return on the additional assets brought to the
    company with her or his investment.
C. In some cases, a state-owned enterprise is a profitable
   entity to begin with and actually subsidizes the state
   coffers. In this case, there is no question about the
   feasibility of the new business. Union leaders should
   organize an employee buyout just as they would when any
   profitable business goes on the market. 

                I look forward to hearing from others on where my opinions
here make sense, and where (and why) I am off base. 

                Thanks 


                --
Dan Bell
International Program Coordinator
Ohio Employee Ownership Center
Kent State University
Kent, OH 44242
(330) 672-3028
(330) 672-4063 fax
dbell@kent.edu
< http://www.kent.edu/oeoc/ <http://www.kent.edu/oeoc/> >