Re: Why EO in privatization?

[Shann Turnbull <sturnbull@mba1963.hbs.edu>]

In reponse to the question set by Dan's as to why employees should be
included in privatisation I would like to offer the following answers:

1.  To promote EQUITY because employees have a claim to share any surplus
values created in any enterprise over and above the market value for their
services because no businees can exist without them.

2. To promote EFFICIENCY because employees can have a greater incentive and
long term personal commitment to the business than individual investors to
add value and possess more relevant knowledge to do so.  However, for
employees to improve operating efficiency, the six necessary conditions
identified by Paul Bernstein in his book on 'Workplace Democratization: Its
internal dynamics' (Transaction Books) need to be also present.  These were:
(i) Participation in decision-making
(ii) Economic return to the participants based on the surplus they produce
(iii) Sharing management level information with employees
(iv) Guaranteed individual rights
(v) An independent appeals system
(vi) A complex particpatory/democratic consiciousness
Refer to my article in the COG library on "Employee Governance";
http://cog.kent.edu/lib/turnbull3.html

3. To promote SELF-GOVERNANCE so that employees can share power to look
after their own interests with other strategic stakeholders like customers
and suppliers (including the host community) who like employees, no
business can exist without them.  As a matter of EQUITY these other
strategic stakeholders also obtain a claim to ownership with rights to
participate in control to further SELF-GOVERNANCE.   This reinforces the
need for employees to participate in control to provide a loyal opposition
to the self interests of other stakeholders to create a division of power
with checks and balances to minimise the need for government regulators,
supervision, and detailed prescriptive laws and regulations which introduce
compliances costs, frustrate operating efficiency, and demoralise those who
can add value.  In this way SELF-GOVERNANCE can reinforce efficiency and
embed DEMOCRACY directly into our wealth creating institutions to minimise
the need for costly, intrusive, insensitive, alienating government
interventions.

However, implicit in these answers is the view that employees only should
not be the owners of organisations.  An inclusive approach is required to
allow all those who add value by being customers, suppliers, etc, share in
the both the wealth they create and how it is created by sharing in its
governance.  Only in this way can self-governance be achieved.  Implicitly
this also more widely spreads the ownership of the means of production to
anchor political democracy in property owning and controlling democracy.

Also implicit in these answers is that investors do not remain "strategic
stakeholders" after a business matures and becomes self-financing.
Strategic stakeholders are those which a business cannot exist without.  So
there is not need to share ownership and control with investors after the
time horizon they used to justify their investment which is normally less
than ten years because of the heavy and compounding discounts investors
apply to future cashflows.  In other words, all mature enterprises should
become owned and controlled by their stakeholders.  No government should
provide an operating franchise to any private infrastructure enterprise
which allows investors to remain owners and controllers after ten years.
If they do, then they are uncessarily making the rich richer and denying
higher welfare for a majority of their constituents.

I have not properly answered Dan's last question but perhaps others could
help in this regard?

Shann


At 04:05 AM 18/11/1999 , you wrote:
>Dear EOPrivers:
>
>There is a discussion going on in the ECONOMICS OF
>OWNERSHIP group which considers issues like
>which forms of ownership are better, ie, private
>concentrated, state, stakeholder, employee etc.
>
>For the EMPLOYEE OWNERSHIP IN PRIVATIZATION group,
>I would like to start from the assumption that, at
>least in some cases, we think an ownership stake
>for employees in the privatized enterprise is a
>good thing.
>
>Please answer a couple of questions:
>
>1. Why?
>
> Is it because we want employees to accumulate capital
> so they are better off?
>
> Is it because we want privatization to be successful, and
> we believe an ownership stake for employees will make
> this happen?
>
> Are there any OTHER possible reasons why?
>
>2. From each of the different perspectives of (1)
>   government, (2) employees (and their union leadership),
>   and (3) a private investor, what FACTORS SHOULD BE
>   CONSIDERED which determine whether to include or
>   NOT include employee ownership in a particular
>   privatization process?
>
>I look forward to your input!
>
>--
>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/

Shann Turnbull
P.O. Box 266 Woollahra, Sydney, Australia, 1350
Phone: 02 9328 7466 office; 02 9327 8487 home
Fax: 02 9327 1497 home & office.  Mobile 0418 222 378
Outside Australia, replace first "0" with "61" after international access code
Life long E-mail: sturnbull@mba1963.hbs.edu
http://www.mpx.com.au/~sturnbull/index.html