When employees become owners

There are over 5,000 firms today with some degree of employee ownership. President Reagan once called employee ownership a fine way to rebuke Marx because it genuinely gives employees control over the means of production. Other proponents have claimed that giving workers a ''piece of the action'' improves product quality and morale, boosts productivity, saves jobs, and will spur the flagging economy. According to pollster Peter Hart, 66 percent of the American work force would prefer to work in an employee-owned firm.

Opponents, however, view employee ownership as a management trick to delude workers into a false sense of control, to stave off or starve out unions, or else a means to dump failing factories on the workers while the conglomerate owners search for better investments elsewhere.

As with most serious questions, the truth lies somewhere in the middle.

The following comments by two employee owners illustrate contradictory positions:

''You can't run a business like a democracy.''

''When money's involved, you can't have too much democracy.''

To understand these contrasting views, it is necessary to distinguish between two broad classes of circumstances in which employees become owners.

The first (about 90 percent of the total) are employee stock ownership plans (ESOPs) in which employees, through a trust, own a percentage of the total shares of common stock. The company contributes this stock to the trust where it is held until the employee leaves. The shares may or may not be voting stock.

In most cases, management, which appoints the trustees, views the ESOP as an alternative benefit plan, not as a mechanism for broadening employee participation. This was the position of the first person quoted above. Such ownership can lead to increased productivity and eventual reward. At one Southern lumber supply chain, some workers were able to retire with several hundred thousand dollars in stock.

Whatever the motivation for establishment of an ESOP, the vast majority are set up in companies which are already profitable. When employees with an ESOP own more than 50 percent of the stock, the firm may undergo an ''identity crisis'' as employees, managers, and owners try to thrash out their new roles. Majority ownership is less of a problem when the management style is open, trusting, and flexible; in short, participatory.

The second and more heart-rending class of employee ownershp is most often born of desperation - like Vermont Asbestos, South Bend Lathe, Rath Packing, or Wierton Steel, where workers, managers, and the community band together to buy their company, jobs, and livelihood. In times of crisis all attention is focused on the rescue mission with none paid to the roles when the employer-employee relations will change in a saved company.

With all the other problems on their platters, it is tempting to forget that employees as owners will have quite different expectations than before. In one employee buy-out, South Bend Lathe, the workers struck their own company in frustration. The president of that company had said that the ESOP gave workers ''all the benefits of ownership without any of the headaches.'' But the workers felt insulted and ignored. One striker observed, ''Management doesn't give us credit for wanting anything except money.''

The most democratic work organization is a cooperative where only employees are owners, with one vote each in the election of directors. In the plywood industry of the Pacific Northwest, cooperatives were found to have 30-60 percent higher productivity than their conventionally structured competitors.

For employee ownership to succeed, certain factors are necessary:

* The greater the percentage of ownership by employees, the more they should be involved in the decisions which affect their work.

* Where the employee ownership stake is large and widespread it is vital that both managers and workers try to supplement their adversarial relationship with a cooperative one. ''Everyone has to learn to give a little,'' said one manager.

* The company must make a viable, marketable product. The best cooperation in the world will not bring the American steel and auto industries back to their former size.

* Ownership should be in voting stock. ''Employees aren't owners if they can't vote their stock,'' said the president of an employee-owned firm in Ohio.

* Employee owners must realize that ownership carries responsibilities as well as rights and learning them requires patience and hard work.

Employee ownership will not cure all of America's economic ills. But when carried out in tandem with thoughtful programs of employee participation in management, it can help companies to compete more efficiently, and, dare we say, more happily.

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