Worker ownership

Form of property (*) in which the workers of a company participate not only through wages or salary but also in the profits and especially the management (*) of the enterprise. Such arrangements include a wide range running from holding minority shares to a majority interest and, in the best of cases, to holding all shares and complete decision-making power in company management. From the earliest times of cooperativism, w.o. has experienced advances and setbacks, passing through the stage of inter-mediation by the state bureaucracy and being subject to a broad array of forms of concealing property that have left it, in practice, in the hands of capitalist groups. The juridical-political factor is decisive when it comes to putting w.o. into practice, because the possibility of developing w.o. depends on the scope and reach of the laws in effect. In a political-social system of humanist type, the primary objective is to incentivate and extend w.o. to the entire population. Humanist political evolution or revolution (*) tends toward structuring a society in which w.o. predominates. This topic may be viewed within the larger issue of the new technical and social relations of production that are beginning to emerge in the world economy, and which correspond to the growing role and power of workers in the process of production, combining the ideals of social justice with the promise of economic efficiency (*Humanist Statement). In a 1996 study by the Centro de Estudios Nacionales para un Desarrollo Alternativo in Chile, CENDA (Center for National Studies of Alternative Development), authors Manuel Riesco and Paola Parra establish precedents for and comparisons of w.o. in various parts of the world. They write: W.O. of companies is a phenomenon that has gained importance in the world in recent decades. In just a few years, tens of millions of workers have acquired significant ownership in tens of thousands of companies around the world, in the most diverse regions and countries. This process is due to a number of factors, one of the most significant being the one developing in the US, in which w.o. has become an important means of financing for private business during a period of dramatic restructuring; it has also received government stimulus through mechanisms of subsidy involving tax exemptions. This practice is spreading and becoming consolidated, forming part of the general trend toward placing greater power in the hands of workers as a way of improving the competitive position of the company. Another phenomenon that has contributed to the increase of w.o. has been the wave of privatizations that has swept over most of the world. The majority of countries that have pushed through massive programs of privatization have utilized w.o. as a means of neutralizing the strong opposition such processes have encountered from workers in the affected companies. As a result of the previous processes, workers have acquired, in some cases and only temporarily, high levels of ownership of their companies. In Russia, for example, 91% of privatized companies are majority-owned by their workers and executives, with executives holding minority shares in the remaining 9%. However, it has rapidly become clear that the workers soon lose their ownership interest of these privatized companies, which after a few years falls into the hands of capitalist groups that in not a few cases simply consist of the former executives of these same companies. This is, then, one of the forms through which the meaning of w.o. can be perverted. In China, the w.o. experience has stirred up interest, not only in the government but also in the unions represented by the FSTCH, which has adopted w.o. as the preferred strategy for the reform of 400,000 state-owned companies (SOC) and another 400,000 affiliated urban collectives, especially the 20,000 S-OC and 100,000 urban collectives that are under the direct control of the FSTCH. The overall direction of the reform process in China seems quite clear, even though its forms have yet to be defined. Give the sheer magnitude of the Chinese economy, its impact on the worldwide experience with w.o. is likely to be huge. In the United Kingdom, over the course of just three years (1978-81), the percentage of the gross national product represented by public sector-owned industry fell from 11% to 2%. However, these privatizations did not fully represent a transfer of state-owned property to workers, which, in this case, meant an increase of capitalist ownership over and above w.o. In the US, 1995 was an important year in the growth of w.o. The formation of new plans for employee stock-ownership reached the highest level since the end of the 1980s, prior to the most recent crisis. In all, considering only the various plans for direct ownership, that is, excluding investments by pension funds, US workers currently own investments worth some $500,000,000,000 dollars, or more than 6% of total company shares in this country. More than 10,000 companies have significant worker ownership. The largest of these has more than 190,000 workers; there are over 780,000 employees in the ten largest. The largest companies in which workers own more than 51% of the shares are: Publix Supermarkets (95,000 workers); United Airlines (75,000); Science Applications (17,000); Avis, car rental (12,500); and Amstead Industries (8,000). Around fifteen million workers are involved in various employee ownership plans, a significant number if we recall that the total number of workers employed in the US manufacturing sector is around twenty million. These figures have risen rapidly over the past twenty years, beginning with the enactment in 1974 of legislation to regulate and stimulate employee stock ownership plans (ESOPs). According to the CENDA study: In Jamaica, legislation inspired by ESOPs in the United States constitutes one of the most modern and complete models in the world. This legislation, passed in April 1995, is oriented toward the private sector, although it does not preclude possible application to privatizing government functions. The objectives of the government are to enroll between three and five percent of workers in ESOPs in less than a year. The law stimulates worker participation in various ways. They can buy stock, deducting the cost from their taxes, or the company can buy stock for them, which is facilitated through various mechanisms. A number of tax incentives are offered to companies that establish ESOPs. For example, if a company lends its workers money to purchase stock at below-market interest rates, it can then deduct annually from its taxes an amount equivalent to the amortized loan payments. If the workers participate in management, the amortization period for purposes of the company’s tax deduction can be reduced to two years. If the source of funds is an external loan, the company can deduct from taxes 25% of the principal and 100% of the interest. If a company makes contributions to its workers to buy stock in the company, that company can deduct from taxes 100% of the contribution of both principal and interest payments on the loan. Finally, the ESOP itself can borrow money to buy stock, with security provided by the company, just as in the US system. In all cases, the stock is kept in a fiduciary or trust fund for the exclusive benefit of the participating workers. The rules for assigning and gradual acquisition or vesting of full individual rights in the stocks are similar to those in the US. The emphasis of the law is on stimulating long-term stock ownership by workers, which is manifested in a series of incentives for this purpose, but there are also provisions allowing employees to sell part of their shares up to a certain limit after the third year, with the company having to repurchase them. In this way, the Jamaican ESOP is envisioned as a retirement fund as well as a mechanism for stimulating savings. Dividends received by the workers are tax-free. There is also an option that allows, at the end of three years, the diversification of up to 50% of the shares into other financial instruments. The law is highly participative, and the shareholders of the ESOP have full rights, with the trustees being required to vote according to the instructions of the workers. A board of at least three trustees oversees the plan, one elected by the employees, another by the company, and the third by common agreement. Shares can be sold to other workers of the company once a worker has gained full individual rights (fully vested), pending approval by the plan administrators. Part-time and temporary workers, and even persons outside the company who ‘maintain a significant economic relationship’ with it, and for example, suppliers can participate in the plan. The principal objective of the law is to promote a more equitable distribution of income, in addition to developing the stock market. The law has been supported by the unions, who have decided to incorporate a demand to include ESOPs in future collective bargaining. The Jamaican ESOP program has received support from the Inter-American Development Bank (IDB). In Spain, the Mondragón cooperatives of the Basque country constitute one of the most successful cases of w.o. in the world. The CENDA report comments on this experience: The Mondragón group comprises over one hundred cooperatives. Today it is one of the twelve largest industrial groups in Spain, providing employment for over 26,000 persons. In 1984 the Mondragón holdings reached $8,900,000,000 with consolidated earnings of over $270,000,000. The group comprises more than eighty industrial cooperatives, a credit union, two distribution cooperatives, and three agricultural cooperatives. It also operates five study centers, four universities and a polytechnic secondary school; three research centers; and six service cooperatives for functions such as janitorial care, consulting, social security, design and insurance. In Spain, Mondragón is the leading force in almost every sector in which it operates: household goods; automobile parts, machine tools; computer automatic controls; construction structures. Moreover, its sales include a high percentage of exports, up to 60% in some product lines. These exports go mainly to countries in the European Union, although markets in the US, China, Hong Kong and Latin America are also important. In this regard it has followed a strategy for internationalization, taking advantage of opportunities for foreign investment. For example, it has established a refrigerator plant in Morocco; factories for household items in Mexico and Holland; semi-conductor manufacturing in Thailand; elevator assembly and maintenance in the United Kingdom; computer services in France; and railroad car manufacturing in China. All of its enterprises are administered democratically on the basis of one worker, one vote. They are divided into three groups: financial, industrial and commercial. Each operates independently but on the basis of a common strategy. Of the 103 Mondragón cooperatives formed between 1956 and 1986, only five failed during that period. Of these, three went bankrupt, one was dissolved, and the other two chose to become conventional capitalist companies (Tseo 1995). The main group of cooperatives is located in the heart of the Basque region, where cooperatives have been in operation at least since 1870, a factor that is certainly relevant to the success of the experience.