SECOND EDITION

      “How to Recognise the Power ofOwnership and How to Use it”

DAVID WHEATCROFT

Director of JOB OWNERSHIP LIMITED (JOL) and EUROPEAN FEDERATION of EMPLOYEE SHARE OWNERSHIP (EFES), Trustee of the STAGECOACH ESOP/PST/QUEST TRUSTS and  former Worker Director of CHESTERFIELD TRANSPORT LIMITED

September  2001

In the hard times of the last World War a titled lady was addressing a group of young wives about how to make a nourishing stew from fish heads, after her talk she invited questions.  A young wife stood up and said "Thank you for your talk and I'm sure my children and myself will enjoy the soup, however my question is WHO HAD THE REST OF THE FISH?"

Perhaps the two most compelling reasons that stand above all others why workers and their representatives (Trade Unions) should support and become involved in Employee Ownership comes firstly from a study by Lester T Thurow an Economist at the Massachusetts Institute of Technology in America.  The study concludes that of all the extra wealth that was created in the US in the 1980’s, 64% has gone to the top, 1% of the population.

If the same has been  repeated in this country (which I suspect it was) it would give some explanation why despite the improving National Figures the ‘Feel Good Factor’ hasn’t filtered through to the general public.  This is simply because the ‘share out’ has been totally distorted therefore created the Fat Cats of our society.

Secondly that it is reported that in the European Union some 30,000 businesses are lost each year due to retiring owners either shutting down their businesses or selling them without giving the workers the opportunity to buy.  It is widely thought that if the employees (with professional advice) were allowed first option to buy the business, then many, if not all of their jobs could be saved.

The financial rewards of employee Ownership does not take away the present wealth of anyone, rather it distributes more evenly the future wealth that is created by everyone.

ABOUT THE AUTHOR

David Wheatcroft worked in the Engineering Industry as an Iron Moulder for many years after leaving school at the age of 15.  His non-vocational education was progressed through the Trade Union Movement serving as Shop Steward, Branch Secretary and Area Representative for 18 years.  In that time he experienced and learned the ‘Hard Knocks’ approach to Industrial Relations.

The steel recession of the 1980’s saw his factory close and he moved into the Transport Industry as a Bus Driver for Chesterfield Transport in 1983.

In 1986 he was elected  as Worker Director of Chesterfield Transport.  Since that time he has been involved in the Privatisation Process that took the company from Public Ownership, through 5 years of a 100% Employee Ownership, to the present position of the Private Ownership of Stagecoach.

David is presently serving as a Trustee on the Stagecoach ESOP, APS and QUEST Boards. He was a founder member and Chairman of the Centre for Employee Ownership and Participation (CEOP) which was a National Organisation set up and run by worker owners to give them a voice in the Employee Ownership Movement, sadly due to lack of  support it has now wound up.  He is also a Director of Job Ownership Limited (JOL) which is a ‘Broad Church’ organisation promoting Employee Ownership Worldwide as well as serving on the Board of the European Federation of Employee Ownership (EFES).

In 1995 he was awarded the Philip Mayo Award for Outstanding Contribution to Employee Ownership and has travelled extensively in his native country (UK) and abroad including Russia, Romania, Poland, Belgium, America, Spain, Hungary, Slovenia, Slovakia, Germany, France and Macedonia - studying, presenting and advising on Employee Ownership.

He is arguably the most experienced and knowledgeable worker owner in the UK on the subject of Employee Ownership and its practical experiences.

ACKNOWLEDGEMENTS

I wish to thank all the people who have contributed, knowingly and unknowingly, which has enabled me to write this booklet.  With a special thank-you to Robert Oakeshott who has prompted and encouraged me, not only to progress along the path of Employee Ownership, but also to pass on my knowledge and experience to others.

CONTENTS

APPENDIX iii   Useful Addresses                                                                                             45                   

1

INTRODUCTION

Any person or group who owns part of an undertaking should be entitled to have a say in the decision making of that body, and like wise should have the ultimate say if they hold the majority shareholding.

The preceding statement includes Worker Owners, but all too often it is found that Management not only manage the Company but also want to manage the Ownership as well, even though they might have a minority stake.  If they succeed it is because of 4 factors:-

THE OWNERSHIP MODEL ALLOWS THEM TO DO SO

THE WORKER OWNERS ACT AS INDIVIDUALS AND NOT COLLECTIVELY

THE WORKER’S REPRESENTATIVES IN EMPLOYMENT (Trade Unions) ALLOWED THIS TO HAPPEN

THE DIRECTORS DIRECTLY OR INDIRECTLY THROUGH THE TRUSTEES (including worker representatives) ARE NOT ACCOUNTABLE TO THE SHAREHOLDERS

If a management is allowed to manage the ownership then in effect they control the whole company and are accountable to no one but themselves.  This situation destroys the Democratic Process that should evolve in any employee owned company be it minority or majority employee owned.

Workers need to utilise their ownership by transferring it into power.  One way to do this is to act collectively, however if they do this they also need to ensure that their representatives are accountable and proportionate to the ownership share.

Workers owning shares in the company they work in is not a new phenomenon, there have been forms of employee ownership for many years.

There are to some people a distinction between owning shares in the company where you work and actually owning the majority shareholding and therefore the controlling interest.  However I feel it is necessary and desirable to look at and include both situations as it is clear one can lead to the other and visa versa.

It is also comforting for recent potential employee owners to know that they are not alone, indeed in the USA it is estimated that there are some 11 million workers in substantial (over 15%) employee owned companies and many thousands in this country (UK).  Unfortunately the merits of employee ownership have been slow to prove and explain, particularly to the workers, hence one of the reasons for writing this booklet.

It seems timely this booklet is presented at a time when Employee Ownership seems to be placed high on the political agenda. It should be said that all three main political parties have supported it for many years in what is commonly referred to as a “Rainbow Coalition”.

This booklet aims to allow workers to view the subject through the eyes of a fellow worker. It is written in layman’s language and gives a step by step approach to the different forms of employee ownership, what holding shares can mean to an employee and how to use the power and responsibility those shares can give you.

After presenting the first edition it was suggested that as the booklet was in modular sections it would be a good idea to create a series of overhead slides for anyone who wishes to  use them as a teaching aid.  These can be obtained on request

2

WHAT IS SO GOOD ABOUT EMPLOYEE OWNERSHIP

Employee Ownership is one of those rare phenomenon that seems to mean all things to all men.

How you look on Employee Ownership and your perception of it depends on where your standpoint is. But the great thing is wherever your standpoint the whole field of Employee Ownership seems to look like an attractive proposition.

CAPITALISTS are attracted to it because it makes many Individual Shareholders.  By educating them in the knowledge of business and interesting them in monetarism it will hopefully convert them to the Capitalist Ideals.

SOCIALISTS like it because on the one hand it encompasses the clause 4 aims of the Old Labour while at the same time fitting nicely into the New Labour Stakeholder Society thinking.

EXISTING OWNERS can take tax advantageous exit routes while at the same time expect the new employee owners to keep the same corporate image, which is usually not what a new outside owner will have in mind.

WORKERS can take a reward in the form of ownership for helping to build the company and also take a share of the Capital Rewards particularly if the company is later sold on.  However most workers take on employee ownership as a means of investing in their future employment and for having a greater say in the running of the company  not for short term capital gain.

MANAGERS should be in favour if only for the simple reason that in the event of an outside take-over it is usually the managers who are the first casualties.  However if the managers are allowed to hold a greater shareholding as in the case of the 51% - 49% models, they control the company and can  make substantial capital gains for a very modest investment, this has created quite a few millionaires and put them in the ‘Fat Cat’ league.

BANKS take a favourable line on Employee Ownership because it is becoming increasingly clear that the Failure Rate and Bad Debt Ratio is significantly lower in employee owned companies than in other forms of companies.

The OVERALL GOOD FEELING about employee ownership is being endorsed by studies made particularly in America that companies with substantial employee shareholding will out-perform other similar companies, not only improving the profitability further but also because it is locally owned and therefore benefiting the local community.  Taken on a National Scale this can be very attractive and beneficial for GOVERNMENTS by improving the National Financial Performance.

Looking at the UNIVERSAL FEELING OF SOCIAL JUSTICE AND FAIRNESS that is embodied in Employee Ownership, also taking into account the study by Lester T. Thurow that was mentioned earlier, it should be said that although reactionary employee ownership is not revolutionary, in the fact that it does not take present wealth away from anyone, but rather distributes future wealth more fairly.

As an INDIVIDUAL I think that the strongest reason for personally being involved in the movement for so long is the desire to promote the REDISTRIBUTION OF WEALTH.  When you have a person who owns £40-£50 billion of assets and on the other hand you have a person who does not have enough to keep them alive in food, then there has to be something wrong in this world. I would like to play a part in trying to redress that. Two phrases have stuck with me for many years now.

If you give the poor food you are called a Saint, If you ask why the poor have no food you are called a communist.

I want to rise not from the working class but with the working class.

The origin of the first I am not sure of, but the second is attributed to Eugene Debs.

3

WHAT ABOUT THE CRITICS ?

It would be wrong for me to say that there are no critics of Employee Ownership (unfounded and outdated in my opinion) and equally wrong for me not to state them.

The four main criticisms of Employee Ownership come equally from the two sides of the political spectrum.

Some in ‘The City’ argue that it restricts the flow of capital and it is difficult to raise finance, while some Trade Unionists say it is merely a tool for Management Buy-outs and also has the effect of weakening their organisations.

On the first two points let me say that the short termism of quick turnover of companies may be good for ‘the City’ but it spells disaster for the workers with instability and insecurity in the forefront of any take-over. 

As the Employee Owned Companies becomes successful so the banks are more ready to lend money.  You hear the saying repeatedly “at first the banks didn’t want to know but now we are successful they are queuing up to lend us money”.

On the latter points, if the Trade Unions in this country adjusted to the situation it faced and took a positive stance, then their position would be enhanced and improved as we have seen both here in local examples but more particularly in America. 

Enlightened and informed Trade Union involvement would also prevent their members from being ‘cannon fodder’ in any disguised Management Buy-out.

SOURCES OF EMPLOYEE OWNERSHIP

Employee Ownership comes from several backgrounds namely COOPs, Benevolent Owners, Succession Ownership, Rising Phoenix, Shedding of Subsidiaries, Start ups and Privatisation.

Up to the time of the Industrial Revolution there was a Feudal System in Britain where most of the populous worked in Agriculture.  These people and their families were all but owned by the landowners.  My Great Grandfather and his family for example were all agricultural workers on the Duke of Portland’s Estate at Welbeck in Nottinghamshire, indeed my Grandmother’s family wedding photograph from 1897 has one of the Duke’s haystacks as a backdrop.

The only other occupation in the district at that time was in the Coal Mines, but the mines were also owned by the same landowners and so people working in them were under the same system of almost feudalism.

The Industrial Revolution saw change in so much that many rural dwelling people moved into the Towns and Cities to work in the Mills and Factories that were springing up.  This in essence created the Employer/Employee classes and brought about the now familiar divisions between Capital and Labour.

The need for workers to defend themselves against exploitation from the factory owners led them to collectivism and the forming of Trade Unions and the Trade Union Movement.

At the same time and in response to the exploitation of the Community of Workers and their families, the Co-operative retail shops were established by the Rochdale Pioneers led by Robert Owen.

It was the Coop retail shops that led to the wider co-operative movement and the

INDUSTRIAL and SERVICE COOPs with their collective worker ownership that

are present today.

In the United Kingdom the difference between the Retail and the Industrial and Service Coops is that the Retail Coops are owned by their customers in the local community, whereas the Industrial and Service Coops are usually solely owned by their workers.

The ownership of Coops have distinctive characteristics and are quite different from the conventionally owned private company.  In a Coop the shares do not play a part in control, there tends to be one person one vote policy and rewards are usually in the form of salaries, job security and participation rather than through Individual Financial Share Ownership.

On a universal scale we couldn’t talk about Coops without mentioning the Mondragon Coops of the Basque Country of Spain where the region has a whole range of Retail, Banks, Service and Industrial Coops working together in an integrated way for the benefit of the community.  Mondragon is an exemplary model for the whole employee ownership movement.

It is very rare yet very real to talk about BENEVOLENT OWNERS who bequeath or sell their companies at a greatly reduced price to the employees.  John Lewis Partnership, Scott Bader, Baxi Heating and Tullis Russell all fall into this category.  While John Lewis and Scott Bader have ownership models similar to the Coops, Baxi Heating and Tullis Russell have a combination of Collective and Individual Ownership. Baxi Heating has now reverted back to  private ownership, not mainly through the fault of the “Model” but from an over ambitious CEO whose personal success was gambolled against the existence of the Employee Ownership.

It is estimated that in the European community alone there are 30,000 successful businesses lost each year because of lack of SUCCESSION OF OWNERSHIP. If the employees were given first refusal to buy these companies before closure it is felt that many of the jobs if not all would be saved.  This area has to be a target for potential growth in the employee ownership field and another chance to prove its success.

One of the most difficult types of employee ownership is to succeed when a company has failed for whatever reason, poor management, loss of markets, inflexible workforce, either one or a combination of the two or all three could be the cause.  The workforce try to resurrect the company in A PHOENIX FROM THE ASHES situation.  ‘The Benn Co-operatives’ in the 1960’s were typical examples of such efforts that failed and more recently Barrhead Sanitary Wear in Scotland ran in to trouble as a Phoenix Model but were rescued by Baxi and so retained some of their employee ownership.

One of the most successful types of Employee Ownership in America has been when the large Steel Corporations decided to consolidate and SHED THEIR SUBSIDIARIES or Special Divisions.  This has had a tremendous impact, not just on the communities but on whole towns like Canton, Ohio.  It has a positive effect of unity and determination where the workers led by the Trade Unions of the Special Bar Division of RTL Steels purchased the subsidiary and set up Republic Engineered Steel, one of the first large 100% employee owned steel companies in America.  This action led to a string of similar buy-outs led mainly by the Trade Union, The United Steelworkers of America.

On this side of the Atlantic, in South Wales a German owned company that made foam seats for a large car manufacturer were being shed by the parent company because they said they couldn’t find quality management in Britain.  The workers bought the company and called it National Foam Products (NFP).  The company closed after 5 years because Chrysler took the market away for reasons best known to Chrysler (but not for poor quality).  NFP had not divested enough to survive such a blow and so reluctantly the workforce decided to call it a day.  This brings up a debate as to when is employee ownership a success or failure which I will cover later, suffice to say at this point that NFP gave employment to some 90 people for 5 years that would not have otherwise been there.

START UPS occur when someone or group of people have an idea, these are usually small companies mainly COOPs but although they tend to employ a few people each , there are a great many of them and so are an important part of the employee ownership scene.  It is quite possible (and is now happening) for successful Coops to convert to Employee Ownership. 

By far the greatest movement towards employee ownership in Britain has been in the last decade and it is a direct result of the PRIVATISATION PROGRAMME of the government of the day.  The newly Privatised Utilities, Ports, Public Services and Public Transport have all had employee ownership to some degree and by far the most significant of these up to yet has been the Privatised British Bus Industry.

5

TYPES OF SHARES

Before we go on it would be appropriate to look at the types of shares that one is likely to encounter in Employee Ownership.

ORDINARY SHARES are the ones which are most commonly used and reflect the success or otherwise of the company.  If the company is listed on the Stock Exchange these are the shares you see moving up and down in value in the financial columns.  Ordinary Shares usually carry one vote for one share.

PREFERENCE SHARES are as the name suggests, paid out in preference to Ordinary Shares in the event of company failure.  Preference Shares are usually non voting, of a fixed price, pay a fixed dividend and redeemed (bought back) over a set period of time, to all intents and purposes they act as a loan to the company.  In some circumstances Preference Shares can be converted to Ordinary Shares.

NON VOTING ORDINARY SHARES, sometimes referred to as ‘Golden Shares’, have the same characteristics of Ordinary Shares except they do not carry votes.  They are used to reward effort through ownership (usually to managers) without giving an equivalent amount of voting power.  As with Preference Shares they can also be used by investors not wanting a say in the running of the company.

DELAYED SHARES are sometimes used to tie people (usually executives) to the company by allowing them extra shares after they served a specific length of time that can be for a period of up to 7 years.  Of course if they leave the company in that time they loose the right to the extra shares.

NON VALUE VOTING SHARES, sometimes called ‘A Shares’ are used as a safeguard to allow managers the right to manage.  These usually only last a few years while the borrowing is high usually as a comfort to the lenders.  Where the employees collectively have more shares than the managers, the lenders feel (wrongly in my opinion) that the employee shareholders will act in an irresponsible way and these shares allow managers to push through certain decisions.

6

TO TRUST OR NOT TO TRUST

In Employee Ownership there are many ways of buying and owning a company, these are similar in most cases to anyone buying any company.  Its just that when employees are buying in full or part it can lead to a few differences.

DIRECT PURCHASE.  The simplest way for Individual Employees to buy a company is to pay the whole asking price ‘up front’ and thus the employees own all the shares which is the full value of the company.

I don’t have to tell you that to ask the average worker to raise the substantial sums of money required to pay for a company outright is an impossible task, except in a few cases where redundancy money has been used to make this possible.  What is more common in the Direct Purchase Model is a combination of Individual Investment and bank borrowing.  This means that the Shares the employees own are the value of their investment or in other words the wealth of the company less the debt.  As the debt is paid off the employees would own more and more of the company and the value of their shares would increase.

PURCHASE USING TRUSTS is a more common method in Britain of employees buying a company and uses an Employee Share Ownership Plan (ESOP).  This method usually includes an Employee Benefit Trust (EBT) where money is borrowed to buy shares for the benefit of the employees.  The shares are then held in the EBT and can then be purchased from the EBT out of future profits and distributed free to the employees usually by using an Approved Profit Share Scheme (APS) with a Profit Sharing Trust (PST) for Tax Purposes.

HYBRIDS.  A combination of Individual Employee Investment as well as an ESOP Trust can be used in an effort to combine the incentives of Individualism with the security of Collectivism.  The Individual Investment Element also has the effect of impressing any possible lenders as well as reducing any borrowing requirement.

PREFERENCE SHARES can be used when employees are asked to put money up front but they don’t want it to be all ‘Risk Capital’ in the form of Ordinary Shares, using Preference Shares is a way of lessening the risk of losing all the investment.

Outside investors may also hold Preference Shares if they are looking for a programmed exit from their investment with the maximum security in the fact that they will be redeemed before the Ordinary Shares if the company folds.

OUTSIDE INVESTORS may be invited into the ownership if the necessary investment amount cannot be found from internal sources and bank debt.  This is usually occurs if the price is too high, maybe because the employee/capital ratio is too low.  For example in the Service Industries like the Buses there are more employees to each £1 million in company value compared with the Hi-Tech Industries where there are few employees to the total value.  In other words it is obvious that it is easier to raise more Investment Capital from more than fewer employees.

HIGH LEVERED BUY-OUT is simply an American term which means that there is a high proportion of borrowing (Leverage) used in the Buy-out, maybe as high as 90-95% of the total price.

7

WHAT IS AN ESOP

There are many descriptions and diagrams presented on how an ESOP works but I prefer just to say that an ESOP is simply a way of passing Ownership in the form of shares to the employees of a company in a tax efficient way.

The first Employee Share (Stock in America) Ownership Plan (ESOP) was devised by Louis Kelso an American Lawyer as a way of providing a second income source for workers.

In Britain we would and should look at it as the third income source as pensions should be regarded as the second income source.  There is a widely held view in this country that the rewards of Employee Ownership should not be used as a substitute for pensions or wages, rather they should be used as an additional level of income not a “top up” for inadequate ones.

Senator Russell Long was the man given credit as the politician responsible for establishing the First American ESOP Laws in 1974.

In Britain you will come across three main types of ESOP, Case Law, Statutory (lately renamed the Qualified Employee Share Trust QUEST) ESOPs and the All Employee Share Ownership Plan (AESOP).  The first is where the existing Trust Laws and Legal Frameworks are used, the second uses New Legislation to create a Ready Made ESOP Model, and the third is a scheme recently introduced by the Labour Government as a way of simplifying all the previous schemes. 

A great many of the Models use the Case Law ESOP because the Statutory (QUEST) ESOP was too restrictive in it conditions and it wasn’t until recently when these conditions were eased, mainly with pressure through the organisation Job Ownership Limited that QUEST became more widely used.

The ESOP plan is usually done by the company borrowing money to buy its own shares which are then held in an Employee Benefit Trust (EBT), some of the future profits are then used to buy these shares and pass them to the individual employees.

The transition takes place through an Approved Profit Share Scheme (APS). Once the shares have come out of the EBT they are passed to and held by another Trust called the PROFIT SHARING TRUST (PST) for a period of two years before they become available to the Employees.  However if they are held in the PST for a further year the Employees will receive them free of any Tax Liabilities.

It should be stressed that while the shares are held in the PST the shares are to all intents and purposes the property of the employees.  For example if the employee leaves the company they are still entitled to these shares after the two or three years (or earlier under certain conditions).

Recently and particularly in this country the term ESOP has been widened to include almost all Employee Shareholders Schemes.  This includes in conventionally owned companies where a percentage of annual profit is used to buy Shares either direct from the owner or in the case of Listed Companies direct from the Stock Exchange.  These shares are similarly held in a PST for a period in similar circumstances to a Conventional ESOP.

Another form of passing shares to Employees is the SAVE AS YOU EARN SHARE/SAVE OPTION SCHEME where employees agree to save money deducted from their wages for a period of 3, 5 or 7 years and at the end of that period enjoy a tax free interest bonus.  The whole of this package can then be used to buy their Companies Shares at a predetermined discounted price (up to 20%).  This saving scheme is totally independent from the company and is usually run by a Building Society or a Bank.

The advantage of this scheme is that at maturity you can take the option to buy the shares or not, so obviously if the share price is lower than the predetermined price you ‘Take the Money and Run’ so to speak.

It is perhaps worth mentioning another plan that is used (but not very often) mainly by private companies called the BUY ONE GET ONE FREE (BOGOF).  This is where a company can (as the name suggests give one free share for every one an employee buys, this plan is usually used to raise equity.

In 1990 the present Labour Government introduced a new scheme to replace all the previous ones. This is called The New ALL EMPLOYEE SHARE OWNERSHIP PLAN (AESOP). The aim of the plan is to extend employee ownership and to double the number of companies running employee share schemes

The plan is an attempt to combine, improve and encompass all aspects of the previous plans in a simple format. Like all conglomerate plans it has an atmosphere of swings and roundabouts, you win some and you lose some.

The first thing I have to say about the new plan is that it is simpler to administer and so more companies should be attracted to it.

For workers who are joining any scheme for the first time they are winners all the way for they are enjoying something that they have previously not had.

As for workers who are in existing schemes it is much more even. Some of the changes are statutory and some are flexible.

The two statutory changes (one good and one bad) are that any employee investment in the scheme is before Income Tax and N.I. deductions whereas any allocated “free” shares have to be held in trust for 5 years before they become available Tax Free instead of the present 3 years.

The two flexible items are both potentially detrimental to the workers (hardly surprising as they were items put forward by the employer’s representatives on the consultation committee).  Firstly is the fact that at present the allocation of shares had to be on a similar terms basis but in future the use of Production Targets (guess who sets them) can be used for either groups or individuals.  The other main factor is that at present once shares have been allocated they are the workers by right, but in the new scheme if the workers leave the company they could forfeit the shares that have already been allocated to them.

Both these measures if implemented by the employers would be a backward step in existing benefits and as such should be resisted by the workers and their representatives  i.e. Trade Unions.

Details of all the share schemes new and old can be found on www.inlandrevenue.gov.uk/shareschemes       

Overall  it seems to me that the TUC is right to welcome the new scheme not only to represent their thousands of members who are already shareholders but to the fact that the new scheme will bring an extra source of income to its members.

However on a final cautionary note it must be recognised that such schemes must never be used to undermine the wages, pensions and conditions that are negotiated by the traditional Trade Union method.

This Wages and Conditions trade for Employee Equity or so called Investment Bargaining though quite common in the US  would be a disaster if it was tried in the UK at this time, particularly bearing in mind the reluctance of  Trade Unions to accept employee ownership.  In my opinion any attempt to introduce Employee Equity would just add ammunition and fuel the negative argument.   

8

SUSTAINING EMPLOYEE OWNERSHIP OR NOT, AS THE CASE MAY BE

Most majority Employee Owned companies have a desire to sustain their ownership for as long as possible (as indeed a great many of the minority ones do) and build their models accordingly.  Usually this is with the use of an ESOP in the old meaning of the word and which incorporates an Employee Benefit Trust (EBT).  This can involve the EBT being the major shareholder in perpetuity as in the Baxi Heating and Chesterfield Transport Models.

However good the intentions are to sustain the employee ownership there can be outside and or inside forces that means the dream cannot be sustained and employee owners have to face the reality of selling their company or in some cases closing it down.  The main thing is that in a majority employee owned company it should be the employee’s choice to make that decision.  I say “should” because clearly we have seen where the power of management has been so great that they have completely  influenced the decision in disproportion to their ownership. In the British Bus Industry I would suspect not so much for the best interest of the company but for their own interest in many cases.

What is clear is that if a company is serious about sustaining employee ownership then the worker owners have to feel there is a value for working in their own company.  This can only be done by Education and Communicating to the Grass Roots to explain to them the advantages, which not only have to be there, but have to be seen to be there. This is my definition when I refer to Transparency

This enlightenment of the workforce should also create future generations of committed key people (including management) that are necessary for the employee ownership to continue beyond one or two generations of worker owners.

Another major threat to sustaining employee ownership is if there is no mechanism for recycling the shares in the company that allows new generations of workers to become the future owners.  If the initial investors keep the ‘Lion’s Share’ of the Shareholding without looking for Ownership Heirs then the company will face the same problems of succession that the single private owner faces. For as the major shareholding block of workers get older and reaching retirement the options for exit routes will be limited to selling to outsiders or going through the employee buy-out procedure again.

In order to alleviate this situation a Regulated Internal Share Market needs to be introduced early in the company’s life with preference to buy given to new starters.  Several rules can be introduced to enable shares to come onto the market. Employees selling shares when they leave the company, limit the number of shares an employee can hold, voluntary selling by employees and place a time limit on shareholding blocks to say 10 years when a percentage of that block has to be put on the market, are just a few ideas that are currently used.

One of the first signals of success in the employee owned companies is the reduction of the turnover of staff, followed by the rate of absenteeism and sickness.

Another signal is the great interest shown in the Share Price, the Allocation of Shares and possible response to any Share Purchase opportunity for the employees.

Sustaining employee ownership will always be under pressure from outside bids as the rewards of the potential ‘share up’ of the capital gains can be quite substantial for each employee in a successful company.  For this reason there must be a realistic Share Price for if it is under valued it will make an outside offer look more attractive than it really is.

The other thing to take note of is that the rewards of the Capital Gains must be judged against the fact that in almost every case the gains in Industrial Democracy that has been achieved in employee ownership has been reversed after the sale.

In order to keep and continue the interest and involvement however the improvements in financial gains are not enough, there has to be a different attitude to managing and decision making, moving to the Culture Change that is necessary for employee owners to feel the full benefits of employee ownership.

I believe there is a direct comparison between sustaining employee ownership and the Percentage of Ownership and or the Control of the Management.  If for example you look at the most successful sustainable employee owned company through Privatisation in Britain namely Tower Colliery. the Trade Union influence is very prominent in balancing the power of the Management, the fact that the percentage of ownership of the employees is reflected in the proportion of control through the Trade Union is the key.

Whether using a Trust can sustain the employee ownership could be argued. I think it is much more important to get employee attitude and relevant control.

It is interesting that both Tower Colliery and Preston Bus two modern long standing EO companies both used the Direct Purchase method to buy. When you visit these companies you immediately recognise that it is the worker attitude and control that is the key factor.

However interestingly enough Tower Colliery have recognised the succession problem that is approaching them and have introduced an Employee Benefit Trust to involve new starters.

So the conclusion would be that a combination of Collectivism and employee attitude and control would be the best environment for sustaining employee ownership if that is what the employee owners are seeking.

9

PERCENTAGE OF EMPLOYEE OWNERSHIP AND INDUSTRIAL DEMOCRACY

Employee Shareholding in a company can be as little or as much as you like but mostly the range is from 5% to 100%, this usually depends on how the previous owner sells the company or how much money the employees can raise.

At this point I would like to return to the difference of workers owning shares in the company and workers owning the majority of the company.  Usually the former means that workers own part of the company for financial rewards only, they can even be exploited just to ‘dress up’ a Management Buy-out, however the latter is usually workers investing in Employment and Democracy and if there is some financial gain then all well and good.

There is much debate about Majority Employee Ownership and while there is no doubt it is desirable I see nothing wrong in Minority Employee Ownership if that is the best that can be achieved and as long as the employees know what they are getting.

It is important to point out that several present Majority Employee Owned Companies started out as Minority ones and if the interim stage had not been used it is doubtful that they would have achieved Majority Ownership at all.

What Majority Employee Ownership does not guarantee however is employee control as many workers have seen to their cost.  If they are faced with this situation the choice is up to them whether they accept the Deal and get involved or not.  

Depending on what percentage can be achieved can determine how much involvement the workers have in running or making decisions in the company, although as I have indicated previously this does not always relate to a direct proportion.  For example I know of an American firm that is 100% employee owned but has almost no employee involvement, indeed when I visited the plant I was told that the surest way to get the sack was to ask what salary your fellow work mate was on.  In another part of the U.S. I visited a large Multinational that has only 25% ownership by the workers and yet these same workers seem to have a large impact on the decision making process.

Some Progressive Companies who have no employee ownership rely on the advantage of employee involvement as a means of creating the Competitive Edge whereas the 100% employee owned one in the U.S. previously quoted relies totally on the Financial Incentive to produce that Edge.

While both methods can be successful there is little doubt and in fact growing evidence that a combination of the two gives the Greatest Edge of all.

10

WORKER DIRECTORS AND TRUSTEES

In any substantially employee owned company you should expect workers to have an effective representation on the Board of Directors and if an Employee Trust is used as Ownership then there should be the same level of representation on that Body too.  In the case of Trusts many are Companies in their own right and are represented by Directors, but the directors of the Trusts are usually called Trustees to distinguish them from the Company Directors.  (In this chapter the name Director cover both Worker Director and Trustee to save confusion)

Whether they are Direct Employees or the Employee Representatives i.e. Full Time Trade Union Officers is a matter for each Individual Company as are a few other debatable issues like do Directors receive salaries?  Are they full time in the post or do they retain their worker status part time?  How many Worker Directors on the board is considered to be effective?  Are they elected or selected?  What length of term do they serve?  Finally are they restricted to a limited number of terms before they stand down? 

I have my own view on these matters that I have formed over the years.  I think it would be wrong of me not to spell them out, but I have to say in fairness that others would strongly disagree with some of the points but that should be for them to say why.

Firstly I think that Worker Directors should be directly employed by the company.  I believe they should receive a small extra salary of say no more than a fifth of their current salary and an agreed budget of expenses in order to be effective.  I believe most strongly that they should work at their own job when they are not doing Directors duties and this should be at least one day per week, mainly for their own benefit but also to keep their identity.  The number of Directors depends on the percentage of ownership but you need at least the ability to propose and second any resolutions.  There are other tactics like a positive vote by the board must include a number of employee directors voting for the proposal.

Democracy is a funny thing but election either directly by the workforce (even if a short list has been firstly drawn up by their representatives i.e. Trade Unions) has got to be the only way for me for employees to pick their Directors.  The term of office should be no longer than three years and if they satisfy the electorate I see no reason why they should have to stand down after a set number of terms. 

What is common throughout the companies  is the effort to be an effective Worker Director, this in my opinion can be summed up in two words, namely Transparency and Accountability.

Transparency is not just doing the job but being seen to do the job, keeping your feet on the ground, communicating on a regular basis with the people you represent and not being afraid to make public and justify any decision you have made (under the criteria spelt out below).

Accountability is not just a matter of communicating to people but also listening to what they have to say and channelling that in to policy that hopefully will benefit (not necessarily please) everyone.  It is reporting back to people your actions and the ultimate accountability of being elected on a regular basis.

It is widely accepted that Representatives of Ownership should not be Representatives of Labour, in other words Worker Directors should not be Local Company Trade Union Officials and visa versa.

While accepting that fact and recognising that special training for the Worker Directors is essential, it is my view that the qualities that are needed to be an effective Worker Director can only be obtained with great background knowledge and experience. Further it is my opinion that this is only available from a Solid Trade Union Background and I find that the most effective people in the posts are indeed past Local Trade Union Officials.

Two issues (or myths as I like to call them) always come up when employee directors are discussed, namely Conflict of Interest and Confidentiality.

It always amazes that no one expects Managers to have a problem of being a Manager and an Owner but everyone sees great conflicts and problems with an ‘Ordinary’ Worker being an Owner.  The fact is everyone faces Conflicts of Interest of varying degrees in their everyday lives, some people handle it better than others irrespective of status and it is the same with ownership.  Handling conflict of interest can be easier with experience and knowledge and whether you are a Manager or Worker is irrelevant.

In my opinion nothing should be confidential that isn’t sensitive to the company at the time, when it ceases to be sensitive then it should cease to be confidential.  Far too often information is kept confidential for the wrong reason, usually to cover up or protect.

Handling confidentiality is another myth that depends on the person.  It is my experience that when a subject is leaked it is more likely a member of management that is to blame.  They do it usually for two reasons, firstly to hopefully enhance their standing with the workforce while at the same time undermining the workers representatives whoever they are.

11

PRIVATISATION AND THE BRITISH BUS INDUSTRY

By far the greatest move towards Employee Ownership in Britain has been created by the late Conservative Government’s Privatisation Programme and in particular the Utilities, Local Authority Services, Ports and Transport.

In the case of Utilities (Gas, Water, Electricity and Coal) employees were offered a small percentage (around 3%) of Shares as individuals at a slight price advantage in preference to outside buyers. 

The exception to this was Tower Colliery, the last Deep Coal Mine in Wales who achieved 100% Employee Ownership by the Direct Purchase Method when each employee invested £8,000 which came mainly from their redundancy money from British Coal.  Tower is a story in itself that someone ought to document, although a television documentary has been made of Tower, it’s a case of the film coming out before the book.

From 1986 The Privatisation of the British Bus Industry led to the greatest number of companies with substantial amounts of employee ownership in any one industry in Britain.

Up until that time the Bus Industry was mostly owned by Three Public Bodies, namely National Bus Company (NBC) that was State Owned, Metropolitans that were under the County Councils and large City Ownership, and thirdly  Municipals that were owned by the Local Town Councils.

The Government broke up the Three Bodies into smaller units of around 600 buses each to be sold on the Private Market, while at the same time deregulation was introduced to ‘stimulate competition’.  Later the Scottish Bus Group and London Transport were also Privatised although deregulation was never introduced in London for fear of the congestion that had been experienced in the other large Cities.

In the National Bus Company the splitting up was easy as it had been running as 70 or so separate profit centred small companies within the group.  In the sell off the vast majority of the companies were Management Buy-outs mainly because people were ignorant to the fact that there was an alternative of ownership involving the workforce.  However there were two exceptions to this from enlightened management and workers, Luton and District, which used the direct method with unequal investment and Peoples Provincial Bus of Fareham who used a combination of equal individual investment of £750 and an ESOP Trust.

All the 7 Metropolitan Companies enjoyed Employee Ownership with the early Buy-outs of Yorkshire Rider and Tyne and Wear Busways using the 51/49% method, where a small management team owned 51% of the shareholding and a 49% ESOP was owned on behalf of the rest of the workforce.  The other 5 companies had a greater percentage share of employee ownership in their models.  I should mention for a matter of interest that Greater Manchester Bus was thought to be too big and was split into Manchester North and South before being Privatised.

Of the 50 or so Municipals, 11 became Employee Owned using various models. However a break through was achieved by Chesterfield Transport who combined the Peoples Provincial’s and the Baxi Models, making it the first to use Equal Individual Investment (£800) with a Perpetual ESOP where the Employee Benefit Trust would always be the Major Shareholder.  Chesterfield was also the first Local Authority Owned Bus Company to become 100% Employee Owned in 1991.

The Scottish Bus Group had a similar percentage of Employee Buy-outs using a combination of Employee Ownership Models.

London Bus was split into 12 companies with only 4 having some Employee Shareholding of a maximum of 30%.

I should point out at this stage that the whole process took some 5 years with Mainline (formally South Yorkshire Transport) completing their deal in 1994.

Further it has to be said that a handful of the Municipals are still owned by their Councils.

Appendix i not only shows the different Models of Employee Ownership used in the British Bus Industry but unfortunately tells the story that most of them have now been sold on.  In my opinion this selling on was due to the following factors:-

Firstly although the Government of the day put in place what it considered to be ample rules and regulations to maintain the small units and therefore competition, it quickly became apparent these measures were totally inadequate.

Management Owners looking for an early exit triggered off aggressive and unfair competition which soon led to the formation of three large groups.  Unfortunately many of the Employee Owned Companies were reluctantly caught up in these moves and also sold to the Big Groups.  As one columnist put it “It’s not Cricket” to which came the reply “We are not playing Cricket anymore!”.

Secondly I have to say that the conduct of the Trade Unions involved in the Bus Industry did nothing to help the cause but as this is covered in the next Chapter, I think that is all that needs to be said at this time.

In short the Artificial Breaking Up on the Industry soon returned to large groups when left to the forces of ‘Raw Capitalism’.  It seems ironic that the Tory Government allowed the Industry to move from Three State Owned Monopolies into Three Privately Owned Monopolies, although some of the more cynical amongst us would say that’s all they wanted to do in the first place.

To sum up I will use the words of a frustrated Mother remonstrating to her wayward Daughter “If you cannot be a good example, you will have to be seen as a dreadful warning”.

But however much we regret the failure of the Bus Companies to sustain Employee Ownership they should not be seen as a failure as far as the overall concept of employee ownership is concerned.

We should remember that they gave the movement many varied models and experiences to pass on to present and future prospective employee owned companies. While perhaps the most important factor was that employee ownership in the British Bus Companies allowed the sharing of the Capital Gains from the Privatisation of the companies to be done on a much fairer scale than any other Buy-out and Sell-out in the industry.  Making in essence many more well fed Thin Cats instead of a few Financially Obese Fat Cats.  

12

TRADE UNION ATTITUDE TO EMPLOYEE OWNERSHIP

Perhaps the most disappointing aspect from a personal point of view (being a life long Trade Unionist myself) has been the response or should I say the lack of it that the Trade Union Movement has shown to Employee Ownership.

In the early years of employee owned companies the Trade Unions, both at Local and National level at best ignored employee ownership and at worst were just plain hostile to it.  However with Privatisation the fact that so many of their members were involved in it meant that the relevant Unions had to address the situation or risk losing more of their members than they already had.  For example at its peak the Transport Union TGWU had up to 60% of its Bus Industry Workers in employee owned companies.

During Privatisation there was a distinction between the Local and the National Unions attitude towards Employee Ownership.  At National level they reluctantly accepted a policy which was to go for employee ownership as a last resort in an effort to maintain jobs, wages and conditions.  Whereas at Local level the officials were faced with the reality of either accepting that the company would be sold to the Management, an outside bidder or take the positive step to Employee Ownership themselves.

To try to be fair some National Officers of many Trade Unions were busy opposing Privatisation and felt that to even  look at Employee Ownership would be taken as a sign of weakness and it would be looked on as a recognition by them that Privatisation was inevitable.  But the fact was Privatisation was already happening underneath the trade union leaders noses and their lack of response to it meant that their members suffered as a consequence.

At local level you couldn’t hide away, it was a reality that the Local Trade Union Officials had to cope without their National Organisations support.

In fact the Local Trade Unionists were so frustrated at their leaders lack of representation that they  helped form The Centre for Employee Ownership and Participation (CEOP).  An organisation run by workers in Employee Owned Companies for the benefit of their fellow workers, in short doing the job that the Trade Unions had failed to do .

In the past few decades the majority of the wealth created globally has passed to the top  1% of the population. In other words owners have got richer and the workers have got poorer.

If you accept that workers make a great contribution to creating wealth, one could argue that the traditional themes of Trade Union Negotiations i.e. Salaries and Conditions have not been enough for the workers to receive  the true rewards of their labour.  From that you could conclude that the Trade Unions have failed their members in this respect.

I would argue that the two sources of worker’s income, namely Salaries and Pensions supplemented by Ownership through shareholding as a third source of income would enable the workers to automatically enjoy the success of the wealth created whilst at the same time receive the proper rate for their labour.

In the UK it is estimated that some 350,000 Trade Union members already own shares in the company where they work ( due mainly to Government promoted schemes). Yet in my experience of representing workers on employee ownership issues for over a decade I have to say that the majority of workers have very little knowledge of how employee shareholding and shareholding in general works.

This is due mainly for two reasons. Firstly, most  workers  historically  have not  been raised in a shareholding environment. Secondly, the lack of support, education and publicity from the workers natural representative sources namely the Trade Unions.

This has resulted in many trade union members (and officials) remaining ignorant of the workings, status and value of their shares and how to use them to the best advantage, be it as individuals or collectively.

The questions I would put to the Trade Unions and their members is,

Why Not Have Some Of The Action?

Why Not Share In The Success You Have Helped To Achieve?

Why Not Spread The Ownership Instead Of Allowing It To Be Concentrated On A Few Who View Employees As An Asset To Be Bought And Sold At Will?

Why Not Influence The Destiny Of The Company You Have Invested Your Future Employment In? 

What is clear is that where Trade Unions have taken a proactive role in employee ownership, whether at National or Local level, they have proved a great success both in the running of the company and in the status of the Union. Unfortunately not many of them have learnt that lesson yet.

What is also clear is that in a Workers Buy-out or Sale of the Company where there was a strong Local Trade Union Leadership and Presence they managed to gain a better deal for the workers and even more so if they were dealing with a sympathetic seller.

In America the story is so different for although the American Trade Unions opposed Employee Ownership initially, they soon took a positive stance and used employee shareholding as a bargaining tool against the ‘hard up’ Steel Barons.  In particular the United Steelworkers of America took the lead with the late James Smith who not only promoted Employee Ownership but led the Buy-outs in such companies as the Republic Engineered Steel (RESI) in Canton, Ohio.

Since the early U.S. Trade Union led Employee Buy-outs other American Trade Unions like the Airline Pilots have followed on. 

I have little doubt in my mind that if the British Trade Unions had taken the same positive stance that their American counterparts did then we would see many more Employee Owned Companies, both existing and being created in this country.

13

JUDGING THE SUCCESS IN EMPLOYEE OWNED COMPANIES

The conventional way to judge the success or failure of a company is usually measured in Financial Terms i.e. the share price and various Financial Ratios.

Another yardstick would be Return on Capital Invested and certainly many workers received a good Return on their Capital Investment when they sold the Bus Companies. A typical example would be Chesterfield Transport employees who each received about £15,000 for an initial investment of £800 over the 5 years of 100% employee ownership.

However I feel it is unfair to measure success in Employee Owned Companies solely on a financial formula.  You have to consider jobs, wages and conditions, welfare, services, the contribution to the local economy and community and the spread of wealth to get an overall and realistic view.

The success of the long established employee owned companies like Scott Bader, John Lewis and the Baxi Partnership speak for themselves in much more than financial terms.  It is the companies that have enjoyed a shorter life span that we should look at like the Employee Owned Bus Companies.

Before I comment further on these however I would like to return to the Welsh Company MFP that I mentioned earlier.  Although the companies life span was only five years, the very fact that at the time of the Employee Buy-out the company was facing certain closure and  because the company provided well paid jobs with good conditions for up to ninety people for those five years makes it a great success in my eyes.  Although at the time the employees felt that they had failed in some way.  It is a fact that they lost their original investment of a few hundred pounds, but they received much more than that in the five years of employment.  As well of course not being a burden on the State by drawing unemployment benefit, which was an almost certain fate in that depressed area of Wales at that time.

Perhaps another indicatior of  success is to quote Gordon Beesley, the Managing Director of Unity Trust Bank. He often says “That experience is now showing that Bank lending is much safer and has a better record of payback with employee owned companies than any other category of companies”.

Of all the employee owned British Bus Buy-outs there was only one financial failure, however the vast majority have now been taken over by the big groups and so no longer exist.

If you compare the life span of the employee owned companies with the many Management Buy-outs that took place at Privatisation, you will see that the employee owned ones lasted an average of 5 years compared with the 2 year average of the Management Buy-outs.  So the ‘Casino Desire’ of the Owner Workers as it has been described, was no worse and in fact in these cases certainly less likely when compared to their Management Counterparts.

There are two further points to state in comparing employee and management buy-outs. Firstly the fact that the employee ownership and involvement tended to relay a better record of employment, wages and conditions.  Secondly to state again that at the time of sale the Capital Gains were much more widely spread than from the Management Owned Companies.

Although profitability in the Bus Industry is as important as in any company it is fair to say that because of its greater commitment to employees and bus services coupled to the fact that there were no Stock Market Shareholders to satisfy, the private employee owned bus companies tended to require and set lower Profit Targets than the ones being demanded by the present large bus monopolies.

There is now growing documented evidence in this country but particularly from America, where studies have been carried out for many years comparing employee owned companies with conventional ones.  An Employee Owned Index has been set up by Companies on both sides of the Atlantic Ocean which illustrates that companies with a substantial degree of employee ownership will out perform other comparable companies.

14

MANAGING THE CULTURE CHANGE

In the corporate competitive environment of today every company needs to look for that little extra edge over its rivals.  Call it the ‘X’ Factor, Competitive Edge, Total Quality Management, Continuous Improvement Programme, Process Management or whatever, they all require a culture change in the organisation where workers participate in the decisions that affect their own working practices and environment.  As one American worker put it “To work not harder, but smarter”

While Employee Ownership is not a guarantee of the Competitive Edge on its own, because employees own part of the company then the environment created can be a contribution to it.  What is clear however is when Employee Ownership is combined with the participative style of management the company is moving towards its greatest potential success.

The culture change is not an easy path to take, some companies have been trying for years to implement it.  What it does fundamentally require is that it is Senior Management led.  This is because it is the Management and in particular the Middle Management usually have the greatest resistance to it simply because they have the greatest fear of it.  But from a management point of view it is a job that needs to be done for the good of the company even though it means a sort of self sacrifice process.

Let me give you a couple of quotations to illustrate this, “MANAGING A COMPANY IS TOO IMPORTANT A JOB TO LEAVE TO MANAGERS TO DO ALONE” said the late James Smith of the United Steelworkers Union, but then some would say “He would say that, wouldn’t he!”. 

However from the other side Owen Gaffney, the retired Head of Human Resources at Polaroid in Boston USA said “ANY MANAGER WHO HAS ATTAINED HIS POSITION BY THE AUTHORITARIAN METHOD WOULD CONSIDER ANYTHING (including suicide) BEFORE HE WOULD CHANGE TO THE PARTICIPATIVE STYLE”.  He also went on to say that only 50% of the Managers would survive that change.

It needs to be said that some Shop Stewards have an equal problem trying to come to terms with their new roles. However for them, refusal to accept the new environment is perhaps less traumatic because apart from losing their status and little power, they should revert back into their own occupation without too much difficulty.

As I said it is a hard path to follow but the extra commitment you can achieve when everyone pulls together for the common good instead of pulling in two directions can be extraordinary, let me tell you of some.

An Employee Bus Company (Peoples Provincial) was facing new and aggressive competition that was threatening their profitability.  So many of the Worker Owners volunteered to work on their day off for no pay to combat the threat which they did most successfully.  Whether it was the action or the commitment of the workforce that frightened the rival off, we can only guess.

An Employee Owned Coal Mine (Tower Colliery) fell behind target because of a major breakdown that stopped production for several days, so the Worker Owners volunteered to work an extra day per week for no pay until the target was achieved which indeed it was.

At my own company (Chesterfield Transport) everyone including Directors took a 2.5% reduction in wages in order to weather increased competition and recession.  But for this, the workers wanted committees of workers and management set up to look at the Bus Network so as to maximise the efficiency with the least effect on the passengers.  It was felt this could only be done with the people who are at the ‘Cutting Edge’ of the job.  Most of these services that were created are still in effect after some 6 years of new ownership.

All of these three examples were from strongly unionised companies and would have been impossible to achieve before the Employee Owners had felt a sense of belonging to the company, incidentally the local unions backed the decisions in all cases.

Perhaps the most striking example on Employee Involvement happens if the company is unfortunately sold on, as has happened to great number of bus companies.  Because of their shareholding the Employee Owners have enjoyed a substantial Capital Gains which can be as high as 3 or 4 times their annual salary.  Furthermore where employee representatives have been part of the negotiating team they have gained guarantees for safeguarding pensions, wages, jobs and other employee benefits as well as the Capital Gains.

These Employee Benefits and Financial Gains would never have been forthcoming in a Conventional Company Sale. 

15

THE SCENE WORLD-WIDE

Without going over old ground too much, I  think  it  fair  to say that the Co-op’s were the  forerunners  of  Employee  Ownership  as  we  know  it,  and  there  is still a great

Co-operative Section not only in this country but also in Italy and Spain, and of course, not forgetting Mondragon.

The introduction of ESOP Law in America now sees some 11 million workers owning shares, although only 1 million are employed in majority employee owned companies.   In this country there are some 1.25 million workers participating in Share Option Schemes and a further 1 million in Profit Share Schemes, though there will be quite a lot of workers who are participating in both schemes at the same time. Taking those figures and also looking at the introduction of the All Employee Share Ownership Plan (AESOP) you could estimate there are around 1.75 to 2 million workers in employee owned companies in this country.  Some would argue with some justification that it should be better because the ESOP Law in this country is regarded by many as the best in the World, but unfortunately we have not made the breakthrough that the more generous law provides.

In the past decade we have seen a great window of opportunity with the former communist Counties of Central and Eastern Europe looking to move to a Market Economy.  This is fertile ground for Employee Ownership and indeed many of these Counties have not only been introduced to Employee Ownership but have actually introduced their own ESOP Laws and Employee Owned Companies.  This has been done as far as this country is concerned mainly by the work of a small ‘Not for Profit’ Organisation called Job Ownership Limited and in particular it’s past Executive Director Robert Oakeshott.

With funding mainly from the British Know How Fund, Job Ownership Limited have promoted Employee Ownership in Russia, Hungary, Ukraine, Romania, Bulgaria, Slovenia, Slovakia and Macedonia as well as working in Africa and Asia.

Partnership Research Limited (JOL’s sister company) host a Biannual International Employee Ownership Conference where delegates from all over the world attend.

Mainly because of the problem of Succession Ownership the European Union are showing a greater interest in Employee Ownership and this is a challenge we must, and in fact are, addressing through the offices of the European Federation of Employee Owners (EFES)

In America one of the Stalwarts of promoting employee ownership is the Capital Ownership Group (COG).

Of course in recent years the introduction of the World Wide Web and Electronic Mail has made the job of communication and exchanging information much easier to do. This has also had a great impact on extending and exchanging the knowledge and experiences of employee ownership.

So it is fair to say that there is a Global Interest in what is a Corporate Ownership Alternative.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

16

CONCLUSION OR IS IT ALL WORTH IT?

While not claiming that Employee Ownership can cure all ills, I do say that it does work not only as an alternative to closure and take over but as an effective and efficient way of running a successful company in a Capitalist Environment.

If it is only a Transition Ownership, as so many other types are, then so be it, it is still a fairer way of distributing the capital gains of the company than any other.

There are still great challenges in the future for the Employee Ownership Movement not least to address the succession problem within the European Union.

The Employee Ownership Movement has to meet that and other challenges and show, as they have done in the past, that there can be an alternative ownership structure that enhances, empowers, commits and rewards the workforce for the benefits, not only for themselves, but for the wider community as a whole.

It has proved that it can help to break down the traditional barriers between capital and labour and by distributing future wealth more fairly it can help to create a better quality of life for us all.

For these reasons alone I have to say “Yes it was, and still is, worth it!”

APPENDIX i

EMPLOYEE OWNED BRITISH BUS COMPANIES

Where they came from and where they are now August 2000

** Are companies quoted on the London Stock Exchange

APPENDIX ii

BOOKLETS, BOOKS AND VIDEOS

Booklets

The involvement of Trade Unions in the UK

Norman Watson, Wales Co-operative Centre

Employee Ownership in the United States

Nigel Mason, Capital Strategies

A Workers Introduction To Employee Ownership, Training Pack

(a series of colour overhead slides)

David Wheatcroft, The Centre of Employee Ownership and Participation

A series of more than 20 Case Studies of Employee Ownership,

Partnership Research

Books

The Case for Worker’s Co-ops

Robert Oakeshott

Jobs and Fairness

Robert Oakeshott

ESOPs ECOPs and Employee Ownership

Malcolm Lynch

Managment of Employee Owned Companies

Robert Postlethwaite

Employee Share Schemes Handbook

David Pett

Videos

A Piece of the Action

Job Ownership Limited

Co-operation is the Business

Notts CDA

Into the Light (Tower Colliery)

Modern Times BBC

APPENDIX iii

USEFUL ADDRESSES

Job Ownership Limited. (JOL) Abford House. 14, Wilton Road. LONDON . 

SW1V 1LT  England.  www.jobownership.co.uk

European Federation of Employed Shareholders. (EFES) 135 Avenue Voltaire. B1030 Brussels.  Belgium. www.efesonline.org

Capital Ownership Group (COG)  cog.kent.edu

UK Inland Revenue www.inlandrevenue.gov.uk/shareschemes

DAVID WHEATCROFT

10 THE CRESCENT  BRIMINGTON  CHESTERFIELD  S43 1AZ  ENGLAND

TEL  01246 233438  MOBILE  07752470022 FAX  0181 6401288

E Mail   david@wheatcroft38.freeeserve.co.uk