Re: United ESOP highlights a problem

[Norman Kurland <thirdway@cesj.org>]

LynnRWilliams@aol.com wrote:

> Norman -
>
> Just a couple of comments concerning your comments to Dan.
>
> It's my recollection of the United arrangement that the Pilots and Machinists
> wished the Flight Attendants to be involved and to have a more inclusive
> ESOP, but the Flight Attendants chose not to join in.

You're right, Lynn.  But, if I were involved, given the desperate situation 
faced
by United, I would have held out for a buyout strategy in which all workers,
including the Flight Attendants, would be covered under the same ESOP umbrella,
as was done in South Bend Lathe.  I realize that the Flight Attendants felt that
they could not afford givebacks, but the ESOP allocation formula could have been
adjusted to give credit for W-2 compensation plus givebacks.  No one would have
been left out and the company would have been saved by whatever fixed 
entitlement
cost reductions were needed to turn red ink into black ink.  The most critical
point I'm making is that total unity and commitment to maximizing ownership
rights for all United workers, including middle managment and top executives, is
essential for building a real co-ownership culture within the company at the
outset, with all unions involved getting an ownership checkoff on the ownership
benefits they negotiate on behalf of their members.  This would shift everyone's
mindsets from the idea of fixed entitlements to a more flexible risk-and-reward
compensation system with more modest fixed entitlements.  I realize that this is
not easy to sell, but, under crisis, people's minds tend to open up.  For 
failing
companies, especially those going into chapter 11 bankruptcy, a 100% leveraged
buyout by workers, structured as I suggested in my paper on South Bend Lathe,
could be sold to bankruptcy trustees and creditors hoping to get something back
for their stake in the company. (Please click on
http://www.cesj.org/vbm/casestudies-vbm/southbendlathe.html)

>
> I obviously don't know whether or not you know, but the Steelworkers'
> "pattern" in dealing with the current steel crisis includes profit sharing
> and 20% ownership.  Leo Gerard is well aware of the ESOP options.

This is good, but I would hope that Leo Gerard would also become aware of our
Capital Homesteading proposals, especially our proposed reforms to the Section 
13
discount powers of the Fed, which would open up a new and vastly less costly
reservoir of funding to finance the modernization needs of steel and other
industries organized by the USW.  I am convinced that, if properly presented,
this idea could be sold to a broad bipartisan coalition in Congress, to the 
White
House and to the Fed, much easier in fact than taxpayer-supported subsidies or
trade protections.  The sell is based on a marriage between classical populism
and sound market economics.  When the USW can use its political muscle to bring
billions of new money to the bargaining table, 21st century unionism will have
arrived.

> To suggest, Norm, as it seems to me you are, that forgetting about the
> importance of defined benefit pensions and such "security" issues and simply
> throwing the enthusiasm of employee ownership at market conditions, whatever
> they may be, and success will ensue, is quite unrealistic.  We, the
> Steelworkers that is, have a fine ESOP at Erie Forge but the market for the
> marine shafts they manufacture is disappearing - no amount of dumping
> security and promoting risk will solve that piece of the problem.  Or,
> similarly, in steel - given current over supply in the world, present trading
> arrangements, the resulting price levels, combined with the lack of concern
> with and destruction of America's manufacturing base - public policies are
> required which address these issues if we are to maintain a steel industry of
> consequence in either domestic or world terms.

I agree.  That's why Kelso's ideas should be seriously studied and debated.
There's nothing to distribute if there's nothing produced.  Kelso's system would
increase what's produced, hold fixed costs down as much as possible and
distribute ownership incomes as broadly as possible as consumption incomes.  If
you have the time, Lynn, please read my paper, "A New Look at Prices and Money:
The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation."  It is
scheduled to be published soon in a scholarly journal.  (Please click on
http://www.cesj.org/binaryeconomics/price-money.html)

One way the steel industry can move toward a more level playing field under
Capital Homesteading is to get behind a new Bretton Woods Conference to change
global monetary policy to go back to fixed foreign exchange rates based not on
gold but on the lowest hourly wage paid within each country to an able-bodied
mature worker, which in most cases would be rural farm workers.  Then prices for
U.S. steel and other manufactured goods would again be competitive in global
markets with the same goods coming from low-wage countries like China.  This
would neutralize the wage arbitrage mentioned in Bill Greider's book, "One 
World,
Ready or Not: The Manic Logic of Global Capitalism."  Then, with Capital
Homesteading reforms to money and capital credit policy, America could rebuild
the rust belt without depending on foreign capital or taxpayer funds.

> I suspect even Walter Reuther would have had to struggle with these issues.
> Certainly his successors have.
>
> Lynn

You're right again, Lynn.  Walter Reuther would have struggled with these 
issues,
but, given his open-mindedness to Kelso's idea, by now, he would have solved
them.

Norm