Re: What we need to do to attract Unions to employee ownership

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

I would like to take up Don Wards point that:

"I think the debate needs to move beyond the role of union leadership to a
recognition that ownership is a desired 
objective regardless of whether a union is involved."

The problem with the discussion is that it is based on the assumption that
the expansion of ownership and control depends upon the use  of ESOP's,
CSOPs, etc.  If other approaches are entertained then new possibilities arise.

As I have stated in the Economics of Ownership discussion, the corporate
rules of ownership and control are inefficient and inequitable and WE
SHOULD NOT PUT UP WITH THEM ANY LONGER!

Rather than providing tax incentives to encourage the spreading of what is
usually LIMITED ownership through ESOPs it would be much more revenue
efficient to use tax incentives to change the corporate rules of the game
to automatically spread ALL corporate ownership and control to ALL
stakeholders.  This would give political and economic legitimacy to union
initiatives through representing a very broad constituency of society.

The reason why this approach is more tax efficient is indicated in my
article "Stakeholder Governance:A cybernetic and property rights analysis'
available from the COG library
http://cog.kent.edu/lib/turnbull6/turnbull6.html  It shows that the value
today of obtaining an annual income in perpetuity of $1.00 is only $5.00
when money can be invested to earn 20% p.a. from other equity investments.
 The tax incentive required to compensate an investor for losing ownership
of all income after fifteen years is a one time incentive today of 3.25
cents.  ($5x6.5% in Table 2).  If the corporate tax rate was 50% then a
$1.00 after tax income would require $2 of before tax income.  To increase
the after tax income 3.25 cents to $1.0325 the tax rate would only have to
be reduced to 48.375% for one year.  In practice a higher incentive could
be provided and would be needed to compensate for any expectations of a
growing income stream.

The creation of Ownership Transfer Corporations (OTCs) by this means would
allow workers to accumulate additional property income over their working
lives and additional retirement assets/income from all OTC companies they
worked for during their working life.  As the property income would be
additional to their normal employment income and retirement benefits, the
need for diversification would be reduced and in any event, their income
sources would automatically become diversified as (i) they acquired
ownership interests as suppliers and/or customers of other OTCs and (ii) as
they changed employment over their working life.

This proposal would also localised ownership and control to allow
communities to improve the ecological sustainability of their communities.
It is this proposal that I ask COG to consider putting forward to the WTO
so that globalisation can promote localisation to develop the social as
well as the economic capital of communities.

Regards

Shann

At 05:49 AM 25/11/1999 , you wrote:
>Deborah:
>
>Good summary of how union leaders do and do not embrace employee ownership. 
>I agree with all you said, however, I think the debate needs to move beyond 
>the role of union leadership to a recognition that ownership is a desired 
>objective regardless of whether a union is involved. In my own case, our 
>company convinced our employees that they would be better served not to be 
>represented by a third party years before we set up our ESOP. So my 
>suggestion is that we concentrate on how ESOP's help all employees not just 
>one group.
>
>Your reference to unions who did accept ownership as a last resort reminded 
>me of Northeast Ohio, where I first got a look at how  well unionized 
>companies could adapt to an ownership culture. Unions have come a long way, 
>since I did picket duty during my college years.
>
>On the matter of ESOP's selling out and distributing the wealth to the 
>employee owners. Our company president always supported this idea, if that 
>is what the employees decided to do. However, anyone who bought a company 
>like ours would probably buy it for the markets and sell off the 
>manufacturing capacity. Employees would end up with a little money in their 
>pocket but no job.
>
>Then there is the social side of work. So long as employee owners feel their 
>contribution is asked for, they have good bosses, friends at work etc. why 
>would they want to throw it away for the proverbial 30 pieces of silver.
>
>Speaking from personal experience, it did make me think, as I appproached 
>retirement that  much of my retirement was tied up in the ESOP, or other 
>company stock, I owned directly. At some age I could have diversified my 
>ESOP but as a member of senior management, I did not want to send out the 
>wrong signal.
>
>The age for diversifying would specifically be known by others in our group. 
>However, if that provision could somehow be liberalized, it might lessen the 
>need for employee owners to sell because of the diversification.
>
>Our Thanksgiving group is starting to arrive, so I will sign off. Would 
>appreciate your and others thoughts.

Shann Turnbull
P.O. Box 266 Woollahra, Sydney, Australia, 1350
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