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Re: What we need to do to attract Unions to employee ownership
Dear Barry, Dan, Tim, Norm and other EO Priv Folks:
I have not
yet had enough time to review all the discussions, although I have
noticed with interest this discussion about unions, co-ops and employee
ownership. Let me suggest two artilces of mine which are now in the COG
library which shed some light on the US labor experience with worker
ownership.One is " US Experience with ESOPs and Democratic Employee
Buyouts" a speech to the labor movement in Dublin, Ireland in 1993,
while they were developing their new ESOP legislation. The other is an
outline of my 1982 Wisconsin Law Review article "Union Experiences
with Worker Ownership". There are a few other related articles
which might interest you as well.
However, I
have been working with labor unions in the US on employee ownerhsip
projects for the last 20 years. I agree that some of their concerns arise
from a parochial view of their position. But much of their concern arises
from more practical matters. ESOPs have been used to prevent or avoid
union organizing. Workers have received worthless stock in some
instances. Companies have used ESOPs to move valuable assets out of
unionized firms and provide the union members with stock in a hollow
shell.
Most labor
leaders these days are not opposed to employee ownership. They just do
not see it as a meaningful tool, except is a limited number of
circumstances. They are not greatly impressed with any examples to date
other than United Airlines. There is some question whether United will
retain a controlling employee ownership stake, as the Unions measure
these benefits against others. Furthermore, United is an example of a
company in which some employees are owners while others are not. This
creates friction amongst the workers.
Some of
the more interesting labor issues arise from successful ESOPs. The United
Steelworkers union embraced the ESOP concept when they felt that there
was no other choice, but to lose the industry to the Japanese. Many
companies were sold to the employees. Of those which survived, a number
have since been sold by the employees, most notably Republic Engineered
Steel. This leads to an important question for those of us who believe
that employee ownership is a social good. Are we satisfied with employee
ownership laws which provide the greatest financial benefit to employees
who sell their company and cease to be employee owners? Can we reasonably
ask employee owners to sacrifice their individual financial benefits for
the community's collective benefit, by asking them to retain perpetual
employee ownership of a company? There are methods for employee owners to
perpetuate ownership, which are employed by some employee owned
companies, including clients of mine. But, in general, long term employee
ownership is not seen as the goal of the Union or the employee owners by
anyone involved in the deal.
There are
certainly many examples of employee ownership serving the welfare of
unionized employees and their communities. Many such companies and unions
are my clients. But these include a small number of companies. The
employee ownership effort was ususally lead by a visionary individual.
Our job is to find, educate and cultivate these visionaries within the
labor movement. Most of them like to use employee ownership when it
can work, but find many situations where it does not work. Much of
their days are consumed in disputes with companies where the company has
absolutely no interest in anything like employee ownership, and the union
is in not position to promote the idea.
If we are
to affect seriously these labor leaders, we need to come up with
policy proposals that help them with the problems as they see them. We
cannot get anywhere by condemning them as either self-serving or lacking
vision. We have to come up with programs that require companies to
provide or bargain about providing employee ownership and control
rights if we want to attract labor to spend time on this issue. My
"stock for government largesse" policy proposal is an effort to
craft such a proposal. My proposal in "ESOPs for People, Not for
Wall Street" (also in the COG library archives) is another. My
proposals may not be the right ones. I would like some help from COG
participants in reviewing these proposal. But I think we need to focus
more on labor's key issues involving realistic fear of the effects of
globalization, if we want them to be interested in our ideas.
Deb Olson
At 05:41 PM 11/23/1999 -0500, you wrote:
Norman Kurland and all others
I have read "A Personal Journey to a Third
Way." Your lifetime of work
on this subject is truly impressive. You have seen the idea through
its
gestation phase, the blossoming and now its growth.
You truly have tenacity and stick-to-it-ness. You also
appear to have
great patience. But now you see the results. Or to be more
accurate,
now you see the results in the United States of America
In the rest of the world the idea is growing more
slowly. It would have
been a good idea for Russia but that opportunity seems to have been
lost.
If I examine why it is growing quickly in the US and not
elsewhere
I come to the conclusion that it is because of the lawyers, bankers
and others who are able to make a living putting the deals
together.
As well, the tax legislation is such that it is advantageous to the
owners to sell to ESOPs. To be precise, and to paraphase the
Clinton 1992 election slogan, "It's the money, stupid."
How can we convince the unions and coops that they would be
better off financially if they were to adopt ESOPs/CSOPs?
Presently, neither group is looking for anything other than
employment. The union leaders want to keep their jobs and
the leaders of the coop movement want to keep their jobs.
Many of them don't seem to be looking beyond that. Am I correct
when
I make this statement? And if I am correct, why is it that
the
union and coop leaders are not able to see other possibilities?
Or maybe I am more accurate when I say this of the coop
movement and less so of unions. As has been pointed
out to me, many unions support the idea but I don't see
a major push by unions to obtain more ownership for their
workers. It is not the union leaders who are at the forefront
of the ESOP/CSOP movement in the US or anywhere else.
Is the profit motive the way to ignite this idea elsewhere
or
am I on the wrong track? Must we only be altruistic in
working
on the ESOP/CSOP concept or should we change our thinking
so that we and everyone else who looks at this looks at it for
personal gain? Would this thinking destroy a good concept
just as short term thinking about personal gain has had
negative implications for other things? Or instead would it
ignite the idea and make it grow more quickly?
Barry Randall
Ottawa, Ontario, Canada
----- Original Message -----
From: Norman G. Kurland
To: EOpriv@cog.kent.edu ; Tim Mitchell ; Randall, Barry
Sent: Sunday, November 21, 1999 10:35 PM
Subject: Re: Unions and coops
Dear Barry, Tim, Dan and the ESOP Privatization Community,
There is a way for genuine labor leaders to be sold on ESOP/CSOP plus the "real third way." But it takes a gutsy, authentic leader like the late Walter Reuther of the UAW. I worked as the CCAP's director of planning for Reuther when he headed the Citizens Crusade Against Poverty from 1965-1968 and brought him together with Kelso in 1966. Reuther, who was committed to the "revitalization of the labor movement" testified on February 20, 1967 before the Joint Economic Committee of Congress that year and pointed out that "stock distributions to workers would help democratize the ownership of America's vast corporate wealth which is totally appallingly undemocratic and unhealthy. . .If workers had definite assurance of equitable shares in the profits of the corporations that employ them, they would see less need to seek an equitable balance between their gains and soaring profits through augmented increases in basic wage rates. This would be a desirable result from the standpoint of stabilization policy because profit sharing does not increase costs. Since profits are a residual, after all costs have been met, and since their size is not determinable until after customers have paid the prices charged for the firm's products, profit sharing [through wider share ownership] cannot be said to have any inflationary impact upon costs and prices." (Page 774, Part 4 of "Hearings, The 1967 Economic Report of the President, Joint Economic Committee, 90th Congress, 2d Session.)
To give you some more background on the successes and failures of Kelso and me in promoting the "pure Kelsonian" principles and applications among U.S. and non-U.S. labor unions, please visit the CESJ web site at http://www.cesj.org and read the labor sections of "A Personal Journey to the Third Way", the case study on South Bend Lathe, and the long paper on Value-Based Management, which you can retrieve from the CESJ "Site Map."
Dan was with me when I made a presentation before the former communist labor unions in Moscow and he saw the positive response I received in making the case for labor's very significant role under the "third way." Working for the Banana Workers of Guatemala in 1972, Joe Recinos and I came very close to acquiring all of United Fruit's banana plantations through a leveraged ESOP with the backing of the U.S. anti-trust division of the Department of Justice. In Egypt in 1987 we worked with the head of the Chemical Workers Union to implement the first leveraged ESOP in the developing world at the Alexandria Tire Company, a joint venture with Pirelli Tire of Italy. In Argentina we developed a leveraged ESOP for the Argentina utility unions in privatizing the San Miguel nuclear power plant. In Bangladesh we are now working with all the textile worker unions to privatize 9 textile mills which the Prime Minister wants to "turn over to the workers."
So, Barry, Tim and Dan, the key to getting organized labor aboard is challenging the leaders and even going over their heads to the rank-and-file, when appropriate, to abandon the feudalistic wage system, which is the cancer of every economy on the globe today and to return to roots of democratic trade unionism by spearheading economic justice for all members of society. (See our definition and paper on economic justice on the web site.)
Norm Kurland
Center for Economic and Social Justice
Web: http://www.cesj.org
Barry Randall wrote:
When I sent the original message on unions and coops I was hopingto find out why unions had not embraced ESOPs and why coopshad not embraced CSOPs. I was hoping to find a way to convincethese two groups to join "the ESOP/CSOP movement." Now after reading Tim's message I want to change the question.How could we take the best union ideals and framework along withthe best from the coop movement and merge them with the bestfrom the ESOP/CSOP concept? Is there common ground betweenthese concepts where they could all be improved upon? Barry RandallOttawa, Ontariobrandall@fox.nstn.ca
-----Original Message-----
From: Tim Mitchell <pentim@netspace.net.au>
To: EOpriv@cog.kent.edu <EOpriv@cog.kent.edu>
Date: Wednesday, October 27, 1999 9:33 AM
Subject: Unions and coops
I've just read Barry and Dan's contributions re above with great interest. I think that's an excellent discussion point. I've wandered to myself how to make coops and esops compatible in a meaningful, practical and significant way. In Australia, there is a new group called Mutuality Australia which I will try and vend in to this discussion. They are committed to the promotion of coops and third way type ideas. I'm also going to forward your comments Dan to some of the high level bureaucrats in my Department of Fair Trading. They administer registration of coops in this state and I have prompted them to develop some thoughts on CSOPs in light of our pending competitive electricity and gas market at all levels including residential. They are keen to set up a discussion group within the Department on the subject and assuming we come up with something useful feed it in to the regulation formation processes. I'll keep you posted. Cheers Tim Mitchell
Attorney Deborah Groban Olson
Principal
Shared Equity Strategies, Inc.
3163 Penobscot Bldg.
645 Griswold St.
Detroit, MI 48226
(ph) 313/ 331-7821 or 964-2460
(f) 313/ 331-2567 or 964-4065
dgo@EsopLaw.com
ESOP and stock plan professionals, providing legal, financial and administrative guidance to create and maintain employee stock ownership plans and other forms of equity compensation.
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