EMPLOYEE OWNERSHIP – A POLITICAL ALTERNATIVE OR A PIG IN A BLANKET

EMPLOYEE OWNERSHIP – A POLITICAL ALTERNATIVE OR A PIG IN A POKE?

Vic Thorpe

COG International Policy Conference

‘Can We Make Globalization Democratic, inclusive and Sustainable?’

Washington, D.C., USA. October 9-11, 2002

WorldCom recently replaced Enron as the title-holder for the biggest corporate bankruptcy in US history. In doing so, it succeeded in wiping out over $160 billion dollars of stock market valuation in the space of a few months, leaving shareholders with nothing. If the moral of the tale were simply that ‘those who live by the market shall die by the market’, one could sit back and watch the unravelling of the free-for-all economy with some equanimity verging on satisfaction. However, WorldCom’s 401 (K) plan is estimated to have held up to 54 per cent of its assets in the company’s stock at its peak value. Enron’s plan had up to 58 per cent of its pension assets in its own stocks. Both companies had matched employee pension plan contributions with blocks of their own stock. That stock is now worthless and the pension plans are unable to fund the planned benefits for their members who have already lost their jobs in the debacle.

According to Fidelity, the largest administrator of US 401 (K) plans, some 44 per cent of all company pension plans match employee contributions in company stock. According to the Employee Benefit Research Institute in Washington, as of April 2002, GE’s 401 (K) plan contained 77.3 per cent own stock and Coca-Cola held 78 per cent of its plan in own stock, for example.[i]

It is alleged by lawyers for WorldCom’s employees that company executives were urging staff to buy stock and not to sell during the beginning of the end-game, while they were themselves were selling as fast as they could go. Enron employees were actually restricted from selling their stock after the company enforced a ‘blackout period’ for selling while its share price collapsed.

As the political and financial media resounds with the self-righteous clang of stable doors slamming against corporate malfeasance and while stock markets worldwide sag yet further under the weight of a loss of confidence in the ability of the system to deliver, is this a good time to try to convince ordinary workers to buy into their own companies? Or is the call to employee ownership merely a call to embrace a double jeopardy – your job AND your pension?

What is ‘employee ownership’ anyway? Its most widely practised and most visible manifestation by far is the minority employee share distribution scheme. Are these to be seen as a legitimate part of the employee ownership spectrum, or they actually destructive of the principles that have been a part of the tradition and history of the employee ownership movement?

Despite the inclusion of its employees in share distribution schemes, Wal-Mart remains firmly in the direct control of the descendants of its founder, Sam Walton, who died in 1992 as the richest man in America. The company has grown by driving local retailers out of business in small communities across America and the world. In the process it breaks up local business supply networks and destroys more jobs than it creates. It is also committedly anti-union.[ii]

Two years ago, Wal-Mart paid out $50 million in settlement for a class-action suit that claimed the company was responsible for making 69,000 employees in Colorado, USA, work regularly “off the clock”. (i.e. They had been required to do extra overtime hours that were not recorded and not paid for). The same allegations have surfaced again recently when the New York Times undertook a survey of the company’s practices.[iii] Another class-action suit filed more recently in Texas, on behalf of over 200,000 present and former Wal-Mart employees, estimates that the company underpaid its workers by $150 million over four years by forcing them to work through breaks. The company also agreed to pay out $400,000 in settlement for another recent lawsuit in relation to just one of its stores in Gallup, New Mexico, after 120 workers complained of being expected to do unpaid work. Do employee ownership schemes merely fool workers into self-exploitation in return for an illusion of ‘partnership’, while giving no real voice in the control of the company or alleviating its impacts on its own workers or on their communities?

‘Social Partnership’ versus Economic Democracy

The request to which this paper is a response was to discuss “how to encourage the social partners to move ownership to the top of the global social agenda”. This formulation placed the author firmly on the horns of a sharp dilemma, since he shares no belief in the concept of ‘social partnership’ and sees no chance that true economic democracy will become a matter for negotiation between the old institutions inherited from two centuries of struggle between labour and capital – the trade unions and the joint-stock corporations. He views ‘social partnership’ as an ideological expression of weariness by a European social democracy that has lost its vision of democratising control over economic and social power and is content to reach an accommodation with the owners of capital. In return, the Party and the labour apparatus that is prepared to follow its lead gets to exercise some political control over and in the name of society at large. The roots of such ‘representative democracy’ are firmly rooted in Leninism and have nothing to offer those who aim for a genuine shift of power over production and distribution out of the hands of the elites and into the working and social community.

This paper will, therefore, be written from the viewpoint that labour and capital are in a continuing situation of armed truce where the disputed territory is, as it always has been, the issue of ownership and control over the means of production and distribution. This matter will not be resolved because the weight of intellectual argument finally enables the current owners and disposers of capital to see the error of their ways. It will be resolved when there is a sufficient and sufficiently coherent coalition of economic and social forces to bring about a transfer of control despite residual opposition from the minority who stand to lose.

The argument will be made that objective circumstances and the natural development of global capitalism are now encouraging the emergence of a broader array of social forces for democratisation of ownership and control than has been evident for many decades. This growing opposition movement has also evoked a social response from those who manage, but do not own, capital.

To build the necessary social impetus to bring about such a major shift in power relations will require an historic alliance between this new movement and those elements of organised labour that are able to share a fresh vision of the future.

The Roots of Change

Capital Concentration

“One capitalist always kills many”, wrote Karl Marx[iv]. It is an historical irony that would not be lost upon that author that the first victim of the latest phase of capitalist concentration should be the state capitalist structures that were built under cover of a wanton misinterpretation of his writings. Marx has been portrayed by detractors and worshippers alike as the promoter of a violent overthrow of the capitalist system and its replacement by yet another centralised form of capital accumulation and control. Yet, his own words look forward clearly to a relatively peaceful resolution of the capitalist dilemma of ever-increasing concentration: “The transformation of scattered private property, arising from individual labour, into capitalist private property is, naturally, a process, incomparably more protracted, violent, and difficult, than the transformation of capitalistic private property, already practically resting on socialised production, into socialised property. In the former case, we had the expropriation of the mass of the people by a few usurpers; in the latter, we have the expropriation of a few usurpers by the mass of the people”[v]. Although the development of centralised capital accumulation has been more protracted than he can ever have expected, it has also been (and continues to be) more violent and more difficult than he can ever have feared. The economic, social and political stresses that are now evident bear witness to the maturing of this trend.

Mergers and acquisitions of one company by another have continued to gather pace as corporations continue their headlong progress towards market domination. This is best demonstrated by reference to individual product markets, but is an advanced feature of all sectors of activity without exception. In the late 1970’s, corporate spending on acquisitions of existing companies for the first time exceeded new investment in expansion. Since that time the trend has deepened inexorably, as corporations have steadily absorbed existing capacity rather than build new.[vi]

In the key industry of energy, driver of the wheels of productive effort, recent years have seen the ‘Seven Sisters’ of energy reduced to just three Very Big Sisters Indeed, with a variety of smaller and poorer cousins hanging on for the ride. The mergers of BP, first with Amoco and later with Arco, created a $200 billion giant, quickly topped by the joining of Exxon with Mobil to achieve a $300 billion market valuation. The knock-on effect was a rash of smaller, but still substantial mergers: Total/Fina/Elf – to total $109 billion in value; Chevron/Texaco struggling to remain viable at $96 billion.

In communications, the very fabric of independent thought and democratic debate underwent a transformation as large publishing houses merged, telecommunications companies telescoped their interests and media empires expanded their influence. Standard-bearer for this sector is the merger of AOL/Time/Warner to create a media presence across the full range of options.

Pharmaceuticals was often taken as the one industry where diversity ruled and patents could be deployed to sustain an artificial monopoly by treatment category that would counteract the trend to concentration. No more. Big mergers, like that of Glaxo/SmithKline/Beecham (for a combined market value of $145 billion) have recently transformed that sector into a giants’ playground just as thoroughly as any other.

No sector has escaped this trend, which has built huge centres of capital holding, centrally administered, but deployed across the globe. The domination of a few very large players in each product market makes nonsense of free-market rhetoric.[vii]

This tendency of the market system towards cartel behaviour has been noted since the earliest times of capitalism. Adam Smith’s quotation on this topic is perhaps the most famous: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary”[viii]. The operations of the GATT and later of the World Trade Organisation provide ample evidence for the accuracy of that 200 year-old lesson and also for the ability of successive apologists for the economic system in place to bury unpopular truths. However, most national governments have recognised that ‘free market competition’ is not a natural outcome of corporate operations. Rather, by eliminating competition from the market by bankruptcy or merger, companies that remain are able to reap ‘abnormal profits’ over a long period. Governments have needed constantly to enforce ‘market freedoms’ by creating laws against ‘unfair’ competition, the abuse of market power, and cartels. But at global level there is very little that can be done to enforce such constraints upon corporations that are large enough to operate on a world basis.

Internal Profit-taking

The major factor that fuels this trend to oligopoly is the dominant objective of the modern corporation for increased share value, rather than for increased profit for distribution or real productive value. These factors are internally driven and address the core of modern corporate governance. Corporate goals are typically to increase stock market value through labour attrition and increased productivity, through asset mergers, selling or closure of divisions perceived as less profitable, share buy-backs and numerous financial transactions that have little to do with the actual declared business objectives of the original firm. The purpose of the modern company has been redefined as the dedicated servicing of the shareholder, without reference to the benefit of the society in which it operates.

Enron was a prime example of this trend. In fact the company possessed no real productive value at all – its business was the buying and selling of electricity and gas. The energy market has been left virtually unaffected by its demise. Its collapse was a direct result of its financial transactions, not of any slump in real energy consumption. Similarly, Vivendi-Universal, is staring annihilation in the face because of its speculative financial holdings across a spectrum of unrelated commercial companies, the purpose of which was only to add market value to its shares.

A key factor in this saga has been the development of executive remuneration. CEO ‘compensation’ typically comprises five elements: basic pay, bonus, privileges, pension and stock options.

When a pro-business journal like ‘The Economist’ runs an article with the title ‘Coming Clean on Stock Options’ and ‘The Financial Times’ sports an editorial headed ‘Time to Halt the Gravy Train’,[ix] it is clear that all is not well between corporate headquarters and its investing public. The first article revealed that in 2001 stock options accounted for 58 per cent of the pay of chief executives of major American corporations, although these payments were not recorded as expenses of operation before calculation of profit. The second showed that British bosses averaged a pay rise of 16.7 per cent in 2000, with the top quartile averaging 37 per cent. It continued: “At a time when profits are under pressure and shareholder value has taken a battering, the increases look not merely greedy, but also tactless and complacent.” Indeed, the Institute for Policy Studies calculates that executive pay in the USA jumped 571 per cent between 1990 and 2000. CEO pay even rose during the course of 2000, while the Standard & Poor 500 suffered a 10 per cent overall loss. Over the same decade, workers’ pay rose just 37 per cent. The result was that bosses’ pay differentials to those of the workers they hired and fired rose from 42 times in 1980 to 475 times by 2000.[x]

There are two relevant points here. First, the excessive salary payouts are based heavily upon share options. This drives top management’s incentive to maximize market value of stock above all else. Second, any moral responsibility on the part of the company for its employees is mocked by the vast differentials in remuneration and by the fact that labour is the first factor to be culled in the search for greater share value. Management’s aim to reap personal benefit from the share price is often best served by selling off the company at a high point in its stock profile, or by increasing the size of the company in the market place by takeover or merger. Increased size also lowers the visibility of big remuneration packages as a proportion of turnover or profits.

The significance of this internal profit-taking can be gauged by the emerging reaction of the stockholder press that the game has now gone so far as to substantially overstate the true level of profit and to destabilise the market for shares. According to a recent estimate, if companies had charged as expenses the value of the options that they issued during 2000, instead of hiding them off the books, they would have reduced reported earnings among the 325 largest American companies by between 17.1 per cent and 21.6 per cent.[xi]

Stock-dealers Rule

If stock prices rose only in response to the managerial efficiency and perceived excellence of the company concerned, the above excessive reward system would at least have a semblance of piratical logic. However, stock prices no longer react year-on-year to that kind of influence. Alongside the emergence of internal profit-taking noted above, there has been a huge increase in the use of shares as speculative instruments on the open market. The ‘stockholder’ of the past has become the ‘stockdealer’ of the present. Share value is more a function of image than a reflection of productive contribution to the world economy. Share value increases in response to cost-cutting that promises (but seldom delivers) another twist to the productivity cycle. Share value increases in response to book evaluations of real estate. And share value increases particularly sharply in response to news of merger. As the Economist article referenced above also points out: “One problem is that economists have identified weaknesses in the efficient-market theory. Arbitrage does not work as it should. Investors who know the true value of a share do not necessarily drive out investors who are ignorant. The psychological biases of investors appear to affect share prices.”

Stockdealers and top managers therefore came to have a joint vested interest in the rise of the external value of the corporation’s stock price and in the promotion of mergers that would produce short-term increases in that price. The system has not only produced an excessive interest in short-termism, but also has resulted in the acceleration of the trend to cost-cutting and market control that has nothing to do with real efficiency or productivity. It is the realisation that this is a house of cards just waiting to fall that has brought the system to its present parlous state.

From Production to Finance Capitalism

Standard market economics supports the idea that profits are obtained for investors by placement of capital in efficient businesses that achieve results by gaining sales with high productivity and by expanding the market for the goods that they offer. The concentration of capital and the oligopolistic control over main product markets has changed this pattern.

Most major companies are facing stagnant or mature world markets for their output. This reflects the lack of interest to date on the part of capital owners to risk their money in developing products for the poor world, where the need for all kinds of goods and services is massive, but the cash to pay for them is lacking. The result is experienced as ‘over-production’ that puts downward pressure on product prices.[xii] [xiii]This increases the urge to merge – to take over the market share of competitors – but also means that the only way to achieve a profitable outcome is to cut costs. Output and market scope remain constant, or declining, but raw materials, labour costs and other costs of operating must be reduced to show a high level of profitability and maintain or increase the share price.

Corporations have also become increasingly reliant upon extra income from sources that have little or no connection with their core business operations. A favourite ploy has been the revaluation of real estate held by the company on the books to show a gain in asset base – known as ‘rent-seeking’.

These tendencies represent a new definition of ‘profit’ by the modern corporation. It is a value derived from exploitation of internal as well as external resources. It does not depend so strongly upon the direct provision of traded goods or services. The corporation increasingly seeks not externally derived profit from the market, but internally-generated and consumed ‘surpluses’ derived from squeezing labour, raw materials prices, cash speculation on the international exchange markets, real-estate revaluations, transfer-pricing and other non-productive devices.

Ownership of capital has become increasingly divorced from its application to productive purposes. It has been estimated that for every $1 circulating in the productive world economy, between $20 and $50 are washing through the global networks of pure financial speculation.[xiv] According to 1993 US Federal Reserve figures, corporate capital raised from the sale of new share offerings amounted to only 4 per cent of the total finance capital of US companies. The remainder came mostly from retained earnings held within the corporation (82 per cent), or from external borrowing (14 per cent). Between 1987 and 1994, companies paid out more to the market to shore up their own share price than they received in stock issues. In early 1998, what is now inaccurately called ‘investment capital’ was flowing FROM corporations INTO the stock markets at an annual rate of $110 billions. In other words, the net flow of funds from the stock market into the firms in which stocks are theoretically invested is actually a negative flow. Productive effort is being bled dry for speculative gain.

Economics as Politics

This new modus operandi has had important effects in the world of politics. Wages, raw materials, currencies, are influenced by an interplay of forces between business, governments, unions, civil society organisations, regional organisations and so on. To manipulate these forces in the interests of increasing a corporate surplus requires a shift in focus from ‘strictly business’ to political operations of lobbying, bribery, propaganda, and public relations. The latest example of this activity in full play has been the open support given by the Bush administration to the US energy corporations against all comers, culminating in a recent intervention by the US State Department to have a human rights lawsuit launched by Indonesian villagers against Exxon/Mobil quashed on the grounds that it would undermine the ‘war on terrorism’.[xv]

Driven from inside by the desire to increase stock market valuation and executive compensation and from outside by the need to increase their global share of saturated markets, corporations have pursued a number of cost-cutting strategies that impact lower income groups, workers and society in general. They also risk undermining the social contract that has existed over the past century to help maintain the ‘armed truce’ that has enabled capital holders to determine the direction of economic development while providing a basic array of comforts to the populations in the countries where their capital is held or administered.

Labour cost reductions have been the favoured route to cost-cutting. This has not been achieved in the main by introduction of new technology that raised the productivity of the existing workforce against a rising sales trend. Stagnant markets have meant that such savings have been made by cutting numbers employed, lowering wages and benefits for those who remain and increasing the intensity of work. Universal demands have been raised for ‘greater labour market flexibility’ – thus continuing the myth that economics is somehow a scientific endeavour that has little choice about it - these are not people, just a ‘labour market’. ‘Labour flexibility’ has amounted to: replacing senior and permanent workers by temporary and junior workers; increasing the pace of work for the same or lower wages and benefits; out-sourcing tasks to lower-waged, unprotected workers in the informal or small-scale sector; shifting production to regions of lower wages and protections. Production chains have been established by the major corporations that shift the focus of subsidiary production from the central factory to small sub-contractors – often across national boundaries.

Over 70 years of painstaking organising work and political and social negotiation produced a series of laws, regulations and institutions aimed at the protection of workers against just such threats. These protections have been attacked directly by cost-cutting strategies and have been seriously weakened. Eager to ensure that capital remains within its borders and does not uproot and fly to other locations, national governments have cooperated with business to deliver ‘de-regulation of the labour markets’, to reduce wage rates in the public services over which they have direct control, and to cut health and environmental protection costs to companies. Changes have been introduced in legislation to weaken the ability of organised workers to respond by using their fundamental human right to withdraw their labour. In this area, as in the management of the global economy, it is the corporation that calls the tune for government.

By its own dynamic, therefore, the corporation has shifted its weight firmly into the centre of the global political and social arena. Although there is nothing new in the peddling of political influence for business advantage, the scale of this shift and its centrality to the operation of modern business gives a firm foothold for the discussion of economics as politics and issues of governance.

Capitalism Unpinned

The traditional justification for the capitalist mode of economic development has been that capital holders will venture their money to underpin the expansion of goods and services for the benefit of society as a whole. The spin-off to society is assumed to be both in products to consume and in jobs to provide the basis for the generalisation of wealth and consumption. The spin-off to the individual capital holder is perceived as a rate of return that is appropriate to the risk undertaken. These are patently not the objectives of the global capitalism that is currently in place.

- From the foregoing arguments it is clear that the stock market is not a source of expansion capital, but has become a siphon for extracting capital from economic activity at a much greater rate than it is supplied.

- Nor is the stock market a guide to the underlying ‘real’ value of companies. On the contrary, the recent unrealities of the stock market have been at the root of the collapse, first of the new technology companies and more recently of the vastly over-valued Enron and WorldCom, etc…

- It cannot even be argued that mergers and acquisitions via the stock market will lead industrial restructuring into new productive avenues. The most notable feature of recent mergers has been their lack of industrial coherence and their intention simply to maximize financial returns from the domination of existing static markets.

Professor Plihon, Professor of Economics at the University of Paris-Nord, writing recently in the weekly newsletter of ATTAC,[xvi]summarizes these trends with the words: “We are therefore faced with a fundamental contradiction: on the one side, the stock market dominates new capitalism; on the other side, the stock market has proved itself incapable of guiding companies towards choices that ensure their long-term development. The famous self-regulating market theory does not work!”

Plihon also goes on to call for a redefinition of corporate objectives:“(The firm) …should be defined not as an ‘object’ owned by shareholders, but as a ‘community of interests’ for which the final goals are not making profits, but creating jobs and wealth. What must be done away with is the concept of company direction being aimed entirely towards ‘the creation of profit for the shareholder’. This implies the remodelling of current legislation in order to recognise the rights of all partners within the enterprise, the front line being composed of its employees. These employees, whose skills represent the fundamental source of value in today’s economy, should have the right to new laws limiting the power of company capital and reinforcing workers’ rights in the face of shareholder strategy”. The call is worth quoting at length, because it demonstrates a potential support base for a debate on radical employee ownership coming from one of the most influential of the new institutional forms and also opens discussion of the direction to be pursued in the search for new allies.

New Movements; New Allies

The social, political and environmental impacts of the economic changes wrought by corporate globalisation have given rise to opposition and calls for a political and economic re-alignment emanating from a wide variety of groups. It is the argument of this paper that the economic conjuncture and the crisis of traditional representative democracy are closely linked and that the upsurge in new political thought and action provides a once-in-a-lifetime opportunity for raising the profile of genuine employee ownership as an important part of the answer to the current dilemma. This will mean reaching out to the new international movement of opposition against corporate globalisation with a clear message that worker ownership and self-management must be key elements in any new programme for change. If people are not in control of the purposes, conditions and benefits of their own labour then there can be no real democracy – however much else may change. The key institution of economic and social control is the hierarchic corporation.

The possibility for fundamental economic, social and political change must be felt as real in the minds of people before any movement can emerge. The mood of the new movement for global social justice is summarised best by the following passage:

‘The supporters of globalization from above control most of the world’s governments. They control the global corporations and most of the world’s wealth. They have grip on the minds of people all over the world. It seems inconceivable that they can be effectively challenged.

Yet social movements have overcome equal or even greater concentrations of wealth and power in the past. Colonized peoples from North America to India, and Africa to Vietnam, have thrown out imperial powers with many times their wealth and firepower. The abolitionist movement eliminated slavery in most of the world and the civil rights movement eliminated legal segregation in the United States. In recent decades, mass movements have brought down powerful dictatorships from Poland to the Philippines. A coordinated domestic and global movement abolished South African apartheid.’[xvii]

All new social movements start with a realisation of common troubles. Personal experience of suffering or alienation encounters similar experience in others and the personal process of working for a solution becomes a socialised one. The upsurge in demands for greater decentralisation and a rejection of top-down politics that has arisen in recent times is a manifestation of underlying dissonance within the prevailing social order.

The focus of much protest that caught the public eye in Seattle, Genoa and Stockholm was the institutions symbolic of corporate globalisation – the World Trade Organisation, International Monetary Fund and the World Bank. These were good targets, since they identify most of the key impacts of corporate power upon democratic accountability and upon the poor across the globe. But the answers to the claim of the economic and political establishments that ‘there is no alternative’ cannot simply be couched in equally global terms, if anything is to really change. Pontification about ‘restructuring the architecture of the international financial institutions’ is empty of meaning, unless it is based upon a much more profound alteration in the purposes and organisation of economic activity at the level of production. Any number of well-sounding structures can be dreamed up – and this author is guilty of some of them - to reverse the present damaging effects of the above institutions at global level; but unless these are founded upon newly-structured economic activity from below, they will quickly revert to their former state, since the defining economic power relations will remain unaltered.

It is here that the new movement lacks cohesion that a revived movement for worker ownership and self-management in production can provide. The coalition of so-called ‘anti-globalisation’ forces comes from a wide variety of single-issue and alternative political groups. It includes workers, environmentalists, third world development activists, anarchists, socialists of all kinds, advocates of corporate social responsibility and ethical investors, indigenous peoples’ groups, womens’ groups, human rights groups and a host of others. Apart from the identification of a common enemy, they lack a single focus around which to construct a clear alternative. But many are working to achieve a greater level of coherence between these varying positions and some main lines are emerging. Within these, the issues of equity, solidarity, diversity, self-management and ecological balance are paramount. The contribution of open-minded and thoughtful advocates of worker ownership could provide welcome insights to this process of ideological reconstruction.

Networks of Influence

Because of the diversity of starting points among the new social actors, the task of working together towards a common set of core principles has required the development of new pathways of influence. Old structural types, derived from ideas of the leadership of a party or a central committee, have been rejected. The new linkages are via networks that start from the local level but that stretch across national borders. The ‘anti-globalisation’ movement is, in fact, internationalist at its very heart. The well-known adage of the environmental movement to ‘think globally but act locally’ is the foundation upon which this communication strategy is built. Having developed a common sense of solidarity, from a common analysis of global problems and an agreed programme of opposition, the loose coalition of forces is now going forward to develop some common goals in the longer term.

The same diversity that has called for new networking structures has also allowed the reverse use of these networks to impact constituencies that would not have been accessible to any one group by any other means. The new movement really found its feet when it succeeded in putting a stop to the Multilateral Agreement on Investment (MAI), despite the power of big business and their political apologists in government and despite a lack of support from traditional institutions of opposition, such as organised labour. It was able to block the proposed ‘Millenium Round’ of the World Trade Organisation and gain the adoption of a treaty governing the development of genetically engineered products.

Attempts by business groupings and investors to come to grips with a corporate governance that has gone out of control is, largely, a reaction to external social and political pressure. The myriad groupings that have coalesced to exert such pressure provide a clear constituency for the ideas of worker ownership, coupled with the philosophies of self-management that many of them intuitively espouse. The main problem for the worker ownership movement, however, is how to obtain a profile for such ideas in the jostling market that this new movement for ‘globalisation from below’ comprises.

It is hardly possible to find sufficient resources of people or money to approach even the main component parts of the global resistance movement to engage in a debate on worker ownership on its own terms. It is possible, however, to use the same networking techniques that have proven so successful in creating the common minimal baseline for this movement to reach its present level of effectiveness.

A key entry point into these networks is the group ATTAC – the Association for the Taxation of Financial Transactions for the Aid of Citizens. Originating in France around the ideas of radical development studies academic, Susan George, and others, this movement has moved very far beyond its original preoccupation with promoting a ‘Tobin tax’. It is a primary organising network for all the alternative opposition groups to corporate globalisation, with chapters in most countries and participating organisations everywhere. It is a main organising network for so-called ‘anti-globalisation’ protests and for workshops and online discussions to develop alternative thinking around the issues raised by this movement. It was a major contributor to realisation of the World Social Summit that took place in Porto Alegre to counterpoint the elitist World Economic Forum and provides a beacon of hope for those who look for some innovative thinking on whose basis can be constructed the soft institutions that will grow and harden to perform the tasks required of 21^st and 22^nd century society.

The main publication of the ATTAC network is ‘Sand in the Wheels’, an open forum that has recently hosted articles and criticism from a diverse range of sources, including former World Bank Chief Economist, Joe Stiglitz; Helmut Reisen of the OECD Development Center; Nobel Peace Prize Winner, Adolfo Perez Esquivel; Dean Baker, Center for Economic and Policy Research; Tom Hansen, Mexico Solidarity Network; writers from Jobs with Justice, Global Exchange, CorpWatch India, Social Action Workshop for Alternatives in Asia, WEED Germany, and a never-ending stream of alternative thinkers. Anyone who intends to influence the debate about the focus of modern social and political action and institutional renewal will need to rise to the challenges posed by this network. Regular input around issues of worker ownership and self-managing organisations would be guaranteed to raise the profile of this discussion. The down side for the faint-hearted is that it would also place worker ownership on the side of the alternative as opposed to the established institutions. That is where this author believes the discussion and practice of worker ownership belongs, but it is not evident from past ‘employee ownership’ discussions that the existing movement is comfortable with that positioning. This is a major item for clarification, since the new movement is intolerant of intellectual fence-sitting.

Corporate Social Responsibility

Despite their alternative status, however, these networks have profoundly affected thinking among groups that have far more in common with the corporate ‘suits’ of Wall Street than with the protestors on the streets of Seattle. The growing strength of the radical consumer movement has impacted business at least as directly as the full-frontal manifestations of opposition from political and human rights groups. But, it is a feature of the new networking that it is difficult to define exactly where the one group ends and the next begins. Consumers react to information that has been researched and transmitted by trade unions, human rights groups and indigenous peoples’ organisations. Their indignation is expressed to the boards of directors in stockholder meetings, to ethical investment managers and directly in the market place. As a result, the circle is closed and previously haughty multinational managers find themselves compelled to discuss their innermost workings with groups whom they would never previously have taken seriously, including also some (such as trade unions) to whom they have long been denying access.

The proliferation of company ‘codes of conduct’ that was a feature of the 1980’s and early 1990’s was an initial recognition of the gathering storm of consumer criticism. But the later 1990’s and the early years of the new century have seen these scattered corporate responses turn into a fully-fledged movement for ‘corporate social responsibility’ that mirrors many of the causes that comprise the new ‘anti-globalisation’ movement. A British survey in 1995 revealed that three in five consumers said that they were prepared to boycott products that they felt did not have high ethical standards[xviii]. A similar US survey also showed that more than 75 per cent of purchasers would avoid shops that sold clothing produced by sweatshop labour, while a full 85 per cent of them said that they would be prepared to pay an extra $1 on a $20 shirt if it carried a label guaranteeing that it had been made under correct conditions[xix].

The movement for corporate social responsibility (CSR) has developed extensively both in business and at the political level. It has grown a whole dependent area of ‘social auditing’ activity that now is beginning to include trade unions and NGO’s in the process of checking sub-contract operations of the leading companies against the core ILO labour codes or against derived codes such as SA 8000 or the Fair Labor Association (FLA). Major brands, such as Nike, have considerable internal ‘compliance’ teams, whose task it is to check and surface any deviation from a company code of ethical production that includes the ILO core labour standards and respect for national legislation. Corporate groups such as the World Business Council for Sustainable Development or CSR Europe, are often staffed by ex-NGO personnel who spend their time raising the level of awareness among company managers about the ethical conduct of business.

In 2001 the European Commission published a Green Paper on ‘Promoting a European Framework for CSR’. Following an extensive period of consultation and feedback from the widest range of social and political stakeholders, it has recently issued a ‘Communication’ that sets out its goals for improving the reporting and monitoring of corporate behaviour – not only inside its borders but for the global activity of its corporate citizens[xx]. Funding will be made available through the programmes of the Commission to encourage development of mechanisms and systems for recording and monitoring company activities with the involvement of communities and social groups.

An interesting pre-cursor of the new type of soft organisational structures that may begin to emerge from the linkages across former ideological divides is the Global Reporting Initiative (GRI). Emerging from concerns of US ethical investor groups and environmentalists of the Coalition for Environmentally Responsible Economies (CERES), the GRI has quickly grown into a standard system for getting at the truth of company policies and practices in the ‘triple bottom line’ areas of environment, social treatment and community impact. Even more interesting is the manner in which this work is undertaken. The GRI is driven by a stakeholder council that is very widely representative of corporations, social, environmental, human rights and development NGO’s, labour unions, academia, the investing public, consultants, even government departments. Its negotiation of new standards and guidelines for company reporting is conducted via a multi-stakeholder process that will involve inputs from all these constituencies at some stage.

From Responsibility to Governance

The development of this movement is extremely significant for the political process. The decline of public confidence in the electoral route to change is widely lamented. A minority of those entitled to vote exercised that right during the election the nominal head of the world’s most powerful nation. Even that election was subject to dispute and abuses that spun the political distrust-level of American citizens into a new spiral. The British government was re-elected on a majority vote from a total ballot of less than three out of every five of the voting population. Abstention rates in other democracies give similar cause for concern. An important element in the public’s cynicism regarding politics is the observation that those who present themselves for public office are mere puppets of much more powerful and decisive corporate interests. Indeed, political leaders regularly reinforce this view by sheltering their inability to take action that would protect their citizens, behind the excuse of feared reprisals from the international business and financial community. A discerning public seems to have decided to cut out the middle-man and go direct to the modern source of political power – those shadowy, unelected figures who inhabit the corporate boardrooms.

As Noreena Hertz puts it in her book ‘The Silent Takeover’: “Politicians are spending some of their time acting like salesmen, and corporations some of their time acting like politicians. Consumers are voting with their pockets while the electorate is increasingly staying away from the polling station. Governments are emulating business and business is emulating government. The state is giving up many of its responsibilities, and corporations are beginning to take them over in its place. Since the eighteenth century western societies have regarded politics as essential to the progressive enactment and widening of reforms. Today we are seeing that other institutions are able to take on some of these roles. As our expectations of politicians are declining our expectations of corporations are becoming both greater and broader.”[xxi]

This switch of strategy gives rise to a number of concerns for anyone interested in the political process. Is consumer-led responsibility any more representative than universal suffrage – even if the latter is poorly exercised? After all, companies need only listen to those who have the power to buy. The poor will get a short shrift in this parliament of purchasers. Is a new cry of ‘I buy; therefore I vote’ a better yardstick by which to define public morality?

Furthermore, can the effect of consumer power survive a slump? Will companies simply jettison triple bottom line concerns and return to the single bottom line when they stare declining profits in the face? What long term guarantees are built into this system for the maintenance of high standards of operational ethics?

It is at this point that the responsibility movement encounters the key issue of governance. In its submission to this year’s World Summit on Sustainable Development, even the Club of Rome states: “Governance is at the core of all challenges we are facing. Wherever we look we find political structures with insufficient performance”.[xxii] Illogically, but perhaps inevitably, the Club of Rome goes on to call for a strengthening of those same failed political institutions of which its members are the elite representatives. At least it shares a perspective with the new movement for a peoples’ globalisation and with the movement for worker ownership that governance is at the core of the problem.

There are a number of entry points for COG into the discussions around the construction of alternative governance structures. One of the elements of the response by the European Commission to its consultations on the CSR Green Paper has been to establish a Stakeholder Forum at European level into which will be invited a wide range of organisations – companies, NGO’s, trade unions, etc – to construct an agenda for forward debate. The aim is to thrash out issues of corporate control and governance in an expanded version of the ‘social dialogue’. While the final composition of this forum is still under discussion, there is a clear opportunity for the perspectives of worker ownership to be brought before a wider audience via that activity. It is worth reflecting that the approach to corporate governance varies widely between cultures. The dominant Anglo-American political culture that we have reviewed above, emphasizes the primacy of private ownership and property rights, focussing on the return to shareholders as the key objective[xxiii]. In continental Europe (notably France, Germany and Netherlands) and in certain Asian countries, however, the interests of employees and other social stakeholders take a much higher profile. The European debate may give a good opportunity to reinforce social expectations in line with the changing mood of society and some elements of business itself.

The ‘World Bank/OECD Governance Forum’ was established “to promote global, regional and local initiatives that aim at improving the institutional framework and practices of corporate governance.” In this process the forum engages relevant groups in an extensive discussion of ways to plug the leaks in corporate control structures. While this forum is in no way a radical think-tank, or a likely candidate for the transfer of majority company ownership into the hands of workers, it may well provide an opportunity for contact and for engaging in more meaningful debate with other stakeholders. The very fact of challenging assumptions of the WB and OECD in such a forum will create a dynamic that cannot be ignored. Again, this will require that the promoters of worker ownership be prepared to argue through their case from a clear position. It also requires a hard-headed understanding that the references to human and worker rights and environmental defence that decorate the rhetoric of these intergovernmental agencies have no effect on their policies that act directly against any such rights and protections.

Engagement in the work of bodies such as the GRI, which welcomes input from any stakeholder group that can demonstrate an interest in the application to company operations of clear and transparent reporting procedures, is also worthwhile. Current guidelines of the GRI are incomplete as regards governance issues and the multi-stakeholder nature of the GRI allows further opportunities for interaction with relevant groups.

It is significant that worker ownership discussions have been virtually absent from this year’s activity (both official and unofficial) surrounding the World Summit on Sustainable Development in Johannesburg. The subject is not really on the radar-scopes of either the government institutions or of the campaigners for a new approach to world development and distribution, although it has a great deal to offer. It is not by closed technical discussions of ESOP pension plans and theories of employee motivation in a capitalism gone wild that this situation will be changed. It requires an engagement of principle and a readiness to campaign for new ways of thinking about the purposes and organisation of economic activity.

Labour’s Dualism

It is important to define where the representatives of labour stand along this spectrum of debate from the radical fringe to the cautious but troubled business establishment. After all, whose party is this anyway?

The answer is that they stand at every point along the line, but nowhere do they come together in a common coherent position on issues of worker ownership. Newer worker solidarity organisations, like SUD (Solidaires, Unitaires, Démocratiques – founded 1987) of France, are firmly embedded in the debates of the ATTAC network and have carried forward interest among certain groups with ‘auto-gestion’. Traditional unions at national and international levels tend to pursue change via a policy of gradualism in negotiation with the institutions of the prevailing system. Nor is it a question of ‘left’ or ‘right’ wings of the trade union movement; rather of old and new approaches to change in power relations in production. The defining issue seems to be a belief in the necessity of leadership of the workers’ movement by a party or bureaucratic elite, as against a more libertarian vision of worker empowerment.

These strongly contrasting perspectives co-exist inside most trade union structures – as they have done almost since the beginnings of the labour movement itself – making it impossible to speak of a ‘trade union view’ of worker ownership in any of its manifestations. All one can do is try to identify trends towards loosening structures of collective action and to work with those trends to inform and convince that worker ownership has a place at the centre of future policies for labour.

On the whole the international institutions of labour - primarily represented by the International Confederation of Free Trade Unions (ICFTU) that groups national labour centres, the Global Union Federations (GUF’s) of sector-level unions and the Trade Union Advisory Committee to the OECD (OECD/TUAC) – concentrate their efforts on influencing the international apparatus of established power from within. Their demands for a presence at the table for labour’s representatives in the World Bank and World Trade Organisation have done nothing to endear them to the new oppositionist movement and precious little to change the impacts of globalisation on ordinary workers. The arguments brought forward by the central labour bureaucracies regarding the inclusion of labour standards in the MAI or in the WTO were not the factors that stopped the first or altered the direction of the second. Indeed, there is no problem endured by workers around the world that is likely to be lessened by the application of yet more international guidance, regulation and legislation on labour and human rights. From the ILO Conventions through the OECD Guidelines to the Universal Declaration of Human Rights, there is more than enough weighty support for the principle of treating people at work with dignity and humanity. The problem is that practice does not respond to rhetoric in high places but to the application of organised power at the point of production. At that level, unfortunately, employers and governments have conspired to undermine the ability of organised labour to withstand attacks on those same rights and freedoms.

Despite what this author perceives as a gross misjudgement by the international labour mainstream in tying its favours to the foundering flagships of a past century, new vessels are being constructed in which to ride the rising tide of change. The most hopeful are those that employ the same networking structures that have proved so effective for the wider social movement. In sharp contrast to the tendency of European labour, that based its organisational style on the social democratic and communist reliance upon class leadership from the centre, the solidarity networks seek to link the periphery in a new definition of collective action. It is therefore no accident that the impulse for this innovative form of international organising has often come from the USA.

Although (perhaps, even, because) American union membership has hit rock bottom in recent years under relentless anti-union pressure at the plant and in the courts, it has become apparent to those that remain that the changes being wrought in the workplace as a result of multinational capital shifts can only be countered by similarly multinational action on the part of labour. Attempts to link up with other organised workers within the same multinational company at its different factories right around the world have been made by some of the global union federations since the 1970’s. It is only in the past decade, however, that these efforts have really begun to pay off with mutual exercises in solidarity, exchanges of useful bargaining data and, latterly, in the signing of a single global accord with central company management to underwrite the application of decent working conditions at each plant site of the company.

These advances have not been won without struggle. The most famous recent examples are the widely-publicised strike by members of the American Steelworkers Union against unilateral labour cuts by the major tire companies, Bridgestone/Firestone and Goodyear. Long months of action involved support from other factories of the two companies in several countries and eventually resulted in some success for the striking workers. This activity, coordinated via the global union federation to which the unions were all affiliated (the ICEM) has since led to formation of permanent global linkages between workers at the individual factories of the companies concerned and has brought new respect for trade union organising to the bargaining table.

Similar networks are now being constructed as a central plank of transnational union organising in the mining, energy, chemical, paper, food, agriculture, auto, textile, communications, transport and construction industries – even in the previously difficult terrain of financial and property services. Contrary to the original fears of some trade union bureaucrats at the beginning of this process that the new networks would undermine traditional union structures if they were to allow the reins of control to slip from their fingers, there is good evidence that they are giving a badly-needed boost to the image and activity of international trade union solidarity among workers battered by many years of struggling against unequal odds. Because these new structures are based inside the companies, they have a direct concern with questions of how and by whom their individual companies are managed. The moment is ripe for a renewed demand to ‘socialise the enterprise’[xxiv] at the new global level of organisation.

At European level this trend appears to draw some support from the formation under law of specific European Works Councils that gather together representatives from all the plants of a given company. In Germany (with its ‘co-determination’ laws), France and Netherlands, for example, enterprise councils do include worker representatives in local decision-making. However, these bodies are specifically removed from questions of ownership and are subject to an over-riding legal responsibility to promote the best interests of the shareholders for a profitable return. The German model in particular can be criticised as having engendered a certain corporatist feeling among its members, that has made no impact on the intensely centralised nature of German capital holdings; responsibility without power. There is no doubt, however, that these bodies could provide a potential foothold for worker ownership ideas and demands if that debate were to be conducted across the labour movement in general.

The scepticism that is apparent among many labour activists who should be a prime audience for ideas of worker ownership is due to both bad examples and poor marketing of this approach to economic management. The poor history of many ESOP schemes that have not led to meaningful worker participation and empowerment (and were never intended to do so) stands as a cautionary tale. Many such schemes have placed control of employee shares firmly in the hands of management or in the hands of a centralised ‘trust’ that stands in for the workers themselves. When hard decisions are to be taken, workers still feel themselves to be victims rather than controllers of the process. The result is actually a perversion of the concept of worker ownership that risks to give less power to the employee shareholder than that exercised by an ordinary absentee owner. German trade unionists can look back to the collapse of the highly-centralised and top-heavy structures of Neue Heimat, a wholly trade union owned construction and insurance conglomerate and believe that they are indeed incapable of managing their own affairs. British unionists view the romantic sorties into ‘workers control’ during the 1970’s at Triumph Meriden and Lucas Aerospace as evidence of failure of the model.

There is a need to review these and the less well-publicised successful models of worker ownership (Scott Bader, Mondragon, Tullis Russell) to debate the lessons of centralised versus decentralised democracy that are inherent. There is also a need to confront the other reasons for hesitancy on the part of many trade unionists to embrace a theory that would replace a system of disciplined obedience to an occasionally elected leadership by a system of collective responsibility.

New Visions for Old

A vision of the new networked union, working together with other social organisations, but secure in its clear mandate to facilitate rather than to lead the process of restructuring ownership and production, is one worth promoting. We may need to face the fact that the old format of trade union centralism is outdated and inappropriate for effective defence of workers’ needs in the latest phase of global capitalism.

The role of the traditional institutions of labour in this process is ambivalent. In the struggle for power over capital, trade unions are creatures of the truce. They are the organised troops that strive to maintain a semblance of equilibrium with corporate power. Over time, the ideals that spurred their forces to battle for justice have dimmed and a mercenary army has taken their place, concerned almost exclusively with the ‘bread and butter issues’. In many parts of the world, their foot-soldiers have simply drifted away to till their own back plots and to regard the posturing as an irrelevance. Many have come to believe that this armed truce is the natural state of affairs; that there is no higher goal; that it is the task of capital owners to direct operations and the task of the union to criticize. Comfortable in their role as champions of the underdog, it is not at all clear that these rump institutions are capable or desirous of embracing an opportunity to change the balance of power definitively and decisively in favour of working people. A determined effort will be required to restructure or to reconstruct organisations designed for labour defence to re-engage the struggle for those goals that first inspired their founders. We can be sure that those who depend upon centralized structures for their position and authority will not lightly agree to dismantle them.

Despite these conflicts inside the labour movement, there is a rising acknowledgement that trade unions must begin to exercise much greater control over those capital areas where they can affect outcomes. In 2000, the 25 largest US Pension funds accounted for two-thirds of all foreign equity investment by US investors[xxv]. Realisation that this primary source of globalisation funds was actually delayed income destined for workers’ retirement, but that workers had little or no say over how or to what end it should be deployed, has given rise to a strong movement to gain control over this important resource. Again, the US labour movement has been the primary source of this innovation, because of its need to develop fresh leverage in face of declining membership numbers. Pension funds and stockholdings have been used increasingly as means to bring pressure to bear on company management boards in cases of dispute or of takeover. The ICFTU Capital Strategies Working Group is an online discussion among key trade union researchers seeking new ways to use the potential locked up in these holdings. There has been a good interchange between this discussion and the COG Organised Labor discussion website.

The collapse of Enron and WorldCom provides a sharp lesson in the need to control the use of workers’ capital and the direction of corporate growth. Union position papers and discussion sites should be ringing with debate about the democratisation of control as an alternative strategy to centrally-directed globalisation. They are not. It will be necessary to reach out more aggressively into the trade union world and to be willing to initiate debates that will lead to re-assessment of fundamental positions, if worker ownership is to become a main objective of a revived union movement. However, trade unions and their members are building alliances at certain points with the new opposition movement. The new forms of solidarity networking are influencing organising and defence work inside the trade union movement just as they are influencing the wider social movement for change. Labour is being forced to revisit arguments regarding structural change that have not been debated since the dawn of the movement. It is clear to some that the re-democratization of society cannot be achieved without the democratisation of production itself. Advocates of worker ownership have an obligation to ensure that these visions are renewed and pursued with the added strength that the new networks of social influence can provide.

COG’s role in this renewal is to provide the information, the case studies of success, and the cautionary advice. But to do this effectively, it must not be afraid to take a political position. Power and control is not negotiable under capitalism. It will be necessary to construct a yet stronger movement for change in order to displace it.

But the opportunity is there to be seized. A lengthy quotation from James Mittleman’s ‘The Globalization Syndrome’ demonstrates the space that the present economic and social conjuncture has made available:

“…the state today is losing control over the monopoly of legitimate coercion that had heretofore been its aegis. Also, with the novel conjunction of deregulation easing state borders and seismic technological advances spurring transnational flows, it is apparent that market forces are ever more politically unaccountable, bringing the question of democratic governance at a global level to the fore and underlining the important role that civil society may play as a pressure point for greater accountability. But a large segment of civil society is itself undemocratic, if not fundamentally repressive. If so, re-embedding the market in an exploitative social structure in the absence of other conditions would not suffice to secure democratic globalization. Hence, a key research question is, What type of re-embedding, and under what conditions? This is partly a matter of determining an appropriate scale for the organisation, or reorganisation, of human life.[xxvi]”

It is the contention of this paper that the biggest obstacle to a wider discussion of employee ownership is the lack of a bold statement regarding what it implies for control and responsibility in corporate governance. To the extent that its promoters are ready to engage in the construction of alternative institutions, based upon devolved and distributed democracy, the movement for worker ownership can be a central component of a more effective response to the major challenge faced by our economic and political systems. In promoting arguments for worker ownership, however, it is not a source of strength to the movement that these issues are fudged and that the necessary internal debates are not followed through more thoroughly for fear of decimating support from different constituencies for some form – any form - of employee share ownership. On the contrary, it is in the clarification of our approaches to questions of power and control in production and distribution that the worker ownership movement can achieve sufficient profile to re-ignite debate and to build support among those whose futures it purports to enhance. In the bid to make the globalized economy democratic, inclusive and sustainable, the need to engage workers and communities directly in their own emancipation must figure high on the agenda.