RE: unions, EO & privatization

[Michael Polzin <polzinm@pilot.msu.edu>]

This note is in response to Dan Bell's comments of October 6 concerning the 
role of unions in ESOP privatizations.  Dan did a very good job of 
identifying union interests pertaining to the privatization process as well 
as in the new ESOP.  I don't have anything to add to his thoughts. I do 
 want to add a couple of comments about the exploration process that leads 
to the actual privatization effort.  Before I do that, however, I should 
offer an introduction so that there is some context to my comments.

I am currently an assistant professor in the School of Labor Relations at 
Michigan State University and also the administrator of PIERS, the Program 
on Innovative Employment Relations Systems, an outreach(extension)  unit of 
the School that works only with unionized organizations on joint 
labor-management change initiatives. Prior to joining the faculty at MSU I 
was the Coordinator of the (state of) Michigan Center for Employee 
Ownership and Gainsharing and worked with Jim Houck promoting those 
concepts to business and union leaders around the state.  Prior to that I 
was on staff with PACE of Philadelphia, Inc. (the Philadelphia Association 
for Cooperative Enterprise), a consulting firm that developed unionized, 
democratic employee owned businesses.

Now, to the comments.  Union involvement should begin as early in the 
exploration process as possible.  The change from a state-owned enterprise 
to a privately held enterprise is a big one for people who have joined 
together for job security, equal and fair treatment and access to good 
wages and benefits. In some cases, even a bad situation is deemed 
preferable to an uncertain one and transforming ownership from state-owned 
to private is, if nothing else, filled with uncertainty in workers' eyes.

The process often starts with an exploration of interest even before a 
preliminary feasibility study is conducted.  So we find ourselves asking 
people if they would consider a different ownership structure even before 
they have any idea of how many people will remain employed, what wages and 
benefits will be, what the costs will be to them, and what their work life 
will be like.  Often, the question of interest is met with resistance from 
the union and for good reason.  If the question is brought to the workers 
and the union by management or by management consultants, the resistance 
may become greater out of concern that the effort will be manipulated in 
ways that will further undermine the interests of workers and the union.

The union may want to fight the privatization effort before they are even 
willing to consider an ownership transition that includes a share to 
workers. And there may be good reason to fight it.  There are numerous 
allegations of services or agencies being privatized (not to ESOPs) where 
the cost of service increases and the most difficult services, or services 
to the most-in-need citizens, are eliminated because they are also the most 
expensive to provide.  Or, some privatizations may have resulted in loss of 
 jobs, major worker  concessions,  significant work  speed-up, or resulted 
in even less voice for workers than they had under the previous ownership 
structure even though the new private company was quite profitable.   A 
faculty member in our College of Social Science, who is a former state 
representative, argues very effectively that privatization undermines 
public control over the service provided and threatens the accountability 
that is such a central element of democratic government.  With those 
apprehensions in mind, some unions might need, politically and 
pragmatically,  to explore non-privatizing alternatives before they can 
consider anything else. Regardless, it is likely to be important to many 
unions that any exploration of alternatives to the status quo be 
broad-based and consider options that include but are not limited to 
private ownership with an ESOP structure.  That may be necessary in order 
for the union to have a beginning level of trust in the process and trust 
in the parties that are bringing the opportunity for change to the table.

Thus, it is imperative, in a unionized organization, that the union be 
involved in exploratory discussions at the earliest opportunity and that 
the union be made full partners in the exploration, feasibility, design, 
development, and implementation process. If they are not partners, then 
resistance is likely to increase.  If they are partners and if the 
feasibility study is favorable, their collective expertise will be 
invaluable in creating a solid foundation for a successful enterprise.

Michael J. Polzin
Assistant Professor and Administrator, PIERS
School of Labor and Industrial Relations
Michigan State University
418 S. Kedzie
East Lansing, MI 48824   USA
517-432-1288
FAX:  517.355.7656
polzinm@msu.edu
http://www.lir.msu.edu