In a Global Economy, Labor needs employee ownership to anchor capital - Is Worker Ownership just Small-Time Self-Exploitation?

[Deborah Groban Olson <dgo@esoplaw.com>]

Dear Org Labor Group:

        

Sorry I
have not been involved to date. I've been spending my COG time on
developing the network, etc.

I just had a chance to read some of the comment and debate on the
question of "What is a Organized Labour? and on question of
"Small Time Self-Exploitation". I have 20 years experience
representing labor organizations in employee ownership situations. From
that position I'd like to address several of these issues.

1) Several general critiques labor organizations have had about employee
ownership are that:

a) it creates primary loyalty to the company not the union - called "enterprise unionism"  breaking worker solidarity- causing workers at one company to agree to take economic concessions at the expense of their brothers and sisters at a competing plant because they are employee owners;

b) it causes workers to cling to undercapitalized companies rather than allowing the undercapitalized to be killed by market forces. If the undercapitalized are allowed to die, the strong companies can grow stronger, allowing the unions to demand more wages and benefits from stronger companies, instead of  having weak, employee owned union companies pull down the overall union wages and benefits;

c) unions cannot sit on both sides of the bargaining table without impossible conflicts of interest.

2) While there is some validity to each of these arguments, I think
each of them is shortsighted when viewed in the context of global
corporations operating in a world where unionization is far from
universal, and where companies can leave unionized countries and move to
locations with the lowest social wage. My view is that labor must
concentrate on both its traditional role and on a new role. The new 
role is that of anchoring capital in countries with high wage, worker
rights and environmental standards (social wage) by whatever means. Each
of labor's critiques has validity, but there are good contrary examples
for each as well.

a) United Airlines is a very good example in which labor obtained control over the future direction of the airline, on three different occasions by attempting employee ownership, and only succeeded in obtaining it on the last attempt. They now have 55% vote on the board of directors and have chosen to take more wages, instead of more stock, to catch up to the rest of the industry. Everything the pilots and machinists are doing at United seems to be very much in the tradition of saavy collective bargaining. Theirs has been one of the only proactive, strategic employee ownership attempts by labor.

b) I differ with Joe Doggett on his analogy of food coops and manufacturing. I have been talking with various people at the UAW for years about the potential benefits of employee ownership. They have attempted it at occasional parts plants, or non-auto related plants, but have always opposed it regarding the auto industry. Their reason - so much capital is needed in the auto industry that any thinly capitalized company is doomed. It is interesting to see that Ford, which invested in people in the 1980's, when it was too poor to invest in equipment (as GM did) is the strongest of auto companies now.

c) Labor missed a very major chance at controlling an auto company when they sold off their rights at Chrysler in the 1980's. The current situation of Daimler-Chrysler and its potential destruction of the Chrysler Corporation in the US must be viewed in light of what might have been. In 1979 the US Congress bailed out the Chrysler corporation, then on the brink of bankruptcy. In exchange it required the Company to provide its employees with stock in exchange for wage and benefit concessions they took. The employees obtained 15% of that publicly traded company. The shares were then worth about $0.50. Several years later, when the stock value reached $10 per share the union members wanted the cash and the union agreed to negotiate an arrangement for employees to cash out. Subsequently, the stock more than quadrupled and the company began outsourcing massively.  Had the Union counseled its members to hold the stock, the company might not have been so successful (because they would have blocked the outsourcing), but they would have likely been in a position to block the Daimler purchase. As you know Daimler has now announced that it will close several major plants and slash 26,000 jobs in the near future. I believe it was a mistake for the union not to try to convince its members to hold onto Chrysler stock.

d) The conflict of interest problem can be solved fairly easily by making sure that the people sitting on the board of directors for the employee/union interests are not those with direct bargaining responsibility for the union, or they may be directly elected by the union workers in their employee owner capacity. I explained this at length in my article 1982 Wisconsin Law Review 792, "Union Experiences with Worker Ownership, Legal and Practical Issues", (which is available on Lexis, but I have not figured out yet if I can link to it - if you want it email me).

        

Until
we have truly global unions, national unions are themselves very much
what they criticize as being "enterprise unions". Thus, the
enterprise union argument seems hollow. Until we have global unions, it
is important for working people to do whatever they can to keep local
productive capital functioning in their communities. If they have to buy
it to keep it there, that is likely a sensible move, so long as they are
not driving down the social wage in their community. The question,
increasingly is "what is their community?" Are they getting
enough control over valuable capital assets that the trade-off is worth
it?  Are they going to use their capital control as leverage to try
to help other workers get such leverage (the best example being
Mondragon).

        

Labor is
already aware that it must move away from the definitions it forged for
itself in the 19th and 20th centuries, while working in essentially
national economies. It is making major efforts to address these questions
on many fronts, including particularly those involving pension
investment. Strategic use of employee ownership is another of these
areas. The United and Chrysler cases should be discussed in greater
length and depth.

        

Regarding
data, the Ohio Employee Ownership Center (OEOC) data concerning Unionized
Ohio companies shows that union uses of worker buyouts and their attempts
have generally been beneficial to the unions. I am hopeful that Joe or
one of the other OEOC people on this list can dig up this data.

Deb

At 10:03 AM 1/16/01 +0100, you wrote:

Dear Friends and Comrades,

I think that the revived discussion has got straight to the point in the
New
Year.  Lisa and Ian's concern that worker ownership may be just a
way of
staving off inevitable collapse - at the expense of wage rates in general
-
needs serious consideration.

Does anyone out there have any direct experience of successful and
growing
worker ownership initiatives?  Or the opposite, come to that?

Is the worker ownership solution only appliccable to small
semi-bankrupt
outfits?

I attach background details of the medium-sized and successful Scott
Bader
Commonwealth chemical concern in the UK which has been going for
many
profitable years.  Also the still profitable Tower Colliery. 
Then there's
the multi-billion dollar US worker takeovers> United Airlines (union
members
cashed in big bucks after some years as majority holders), Republic
Steel,
many quite big paper companies, etc.  Of course, LTV, one of the
biggest
steel takeovers, is in the throes of bankruptcy again at the 
moment.

Can anyone point to research data that helps us on this?

Is it just that we have not been bold enough to try it out as a
positive,
but only as a defensive strategy?

Vic Thorpe