Whats Happening to Worker Ownership in the United States?
July 1, 1985 -
The wrenching changes taking place in all modern economies today have many causes and many ramifications. One thing is certain, the traditional approach to labour-management relations is being severely tested. That's one of the reasons why new styles of management and new kinds of labour management relations are being tried in North America.
Those who are firmly committed to the ideology of the Left or the Right are not much interested in these new experiements. The Left clamours for increased state intervention while the Right believes economic prosperity will come as soon as market forces are released. But some, more willing to develop an imaginative approach to labour management relations, are trying to overcome the traditional animosity between these two parties by involving workers in the management of the enterprise.
Robert Kuttner, writing in The New Republic of June 17, 1985, takes a critical look at the concept and practice of employee ownership in three American companies struggling to survive in a competitive environment. They are the well-known maverick airline company, People Express, the hard-pressed Eastern Airlines, and the large employee-owned steel company, Weirton Steel.
People Express is a non-union company of which 35 per cent of the stock is owned by its workers. It started in 1981 with three planes and 250 employees and by 1985, under the charismatic leadership of Don Burr, had grown to a billion-dollar airline. People Express offers low fares and no-frills service. Each employee must buy 100 shares of stock for approximately $1,000, and has the opportunity to buy additional stock at slightly below market price. Salaries begin at $17,000 a year for service managers and $22,000 for pilots. All employees are called managers, and they perform a variety of jobs.
Mr. Kuttner points out, however, that the theory of equality, participation and no managerial hierarchy is not quite mirrored in practice. For example, People Express has a number of classifications , including maintenance crew, baggage attendant and telephone reservation clerk, that are not part of the worker-owner system. Besides, People Express has run into considerable problems, including low profits and the need to find a new and more appropriate organizational structure for a 4,OOO-employee company. Kuttner concludes that although People Express does not live up to its boosterish founder's claims, it "invites far more worker participation than most companies" and "it shows that employee ownership can help fuel efficiency, growth, and morale."
Eastern Airlines is in a very different situation than People Express; it is well-established, unionized by three different unions and plagued by losses so extensive that it nearly went bankrupt in 1983.
After difficult contract negotiations in 1983, management and labour agreed to accept a wage cut in exchange for a worker stock arrangement and a substantial sharing with the unions of company financial data and of decision-making power. Although the agreement produced a number of beneficial results, negotiations for the 1985-86 agreement again broke down when management demanded permanent wage reductions. Despite the shortcomings of the new arrangement between Eastern's unions and management, Kuttner discerns certain positive elements. He concludes:
To the extent that both labor and management are responsible for the American bureaucratic style of labor relations, with its bloated middle management, its baroque job classifications and inefficient work rules, Eastern-style power sharing gives the union a more useful and constructive kind of authority to defend worker interests. It can also equip the union with new analytical, financial, and managerial skills, which vastly increase its sophistication.
Weirton Steel in West Virginia was bought by its 7 ,500 employees in 1982. The company was forced to reduce its extremely high labour cost by 32 per cent, and, faced with the alternative of unemployment, the employees accepted this reduction. Consequently, the company has resumed a profitable position and over 7,000 jobs were saved.
Experiments in worker-owned or worker-controlled businesses involve determined attempts to operate economically viable businesses in which workers can experience a sense of belonging and achievement for the work they do. Kuttner writes that worker ownership calls for "an entirely different conception of labor in an entrepreneurial economy." Given the general weakness of organized labour, he believes that managers, not unions, "will define most of the next wave of strategies for humanizing the workplace . . . But a competition to see who can invent the more rewarding brand of employee participation is a vast improvement over the old industrial standoff in which one form of archaic authority was countered by a set of work rules and rituals almost as alienating."