Worker Ownership – The Untold Stories
A typical question, as a previous post here at American Catholic, with regard to worker’s cooperatives has been: if these firms are so great, why aren’t there more of them?
The short answer to that question is that there are more of them, in several countries, than there ever has been before. The trend towards worker ownership of businesses is on the increase, in the United States and elsewhere, and has been for sometime. Gar Aplerovitz, in America Beyond Capitalism, gives us an overview of cooperatives in the United States:
It is rarely realized that there are more than 48,000 co-ops operating in the United States – and that 120 million Americans are co-op members. Roughly 10,000 credit unions supply financial services to 83 million members. ; 36 million Americans purchase their electricity from rural electricity cooperatives; more than a thousand mutual insurance companies are owned by their policy holders; and approximately 30 percent of farm products are marketed through cooperatives.
While the democratic model of the workers cooperative is still not as common as I would like, employee ownership in various forms, and the democratization of production to varying degrees, is an upward trend.
In 2003 there were 8.8 million workers participating in Employee Stock Ownership Plans (or ESOPs) in the United States. Some of these ESOPs have been founded on, and run according to some or all of the principles of the traditional worker’s cooperative, including, most importantly, a degree of democratic control of the workplace and the accountability of the firm to the community.
Alperovitz gives us some examples of this trend:
The Appleton company, a world leader in specialty paper production in Appleton, Wisconsin, became employee-owned when the company was put up for sale by Arjo Wiggins. Appleton, the multinational company that owned it – and the 2,500 employees decided that they had just as much a right to buy it as anyone else. Reflexite, an optics company based in New Avon, Connecticut, became employee-owned in 1985 after 3M made a strong bid for the company and the founding owners, loyal to their workers and the town, preferred to sell to the employees instead.
According to Aplerovitz, there are now 11,000 ESOPs in the United States, with asset holdings totaling more than $400 billion. Other impressive ESOPs include Gore-Tex apparel, which made Fortune’s “Best Company to Work For” list. There is Western Solutions, Inc, a firm that helps communities clean up environmental damage owned completely by its employees. There is Fetter Printing Company in Louisville, Kentucky – a firm with only 200 employees, 17.5 million in annual revenue, and ranked as one of the top 25 printers in the United States. The list goes on and on.
Not all ESOPs are completely owned by workers, and hence, not all are very democratic. But as Aplerovitz notes, the trend towards even greater ownership and democratization is on the upswing. 30% of ESOPs are majority-owned by workers. Nearly half of them already do include voting rights for participants. The percentage of majority-owned worker firms jumped by 50% during the 1990s. Given all of this, Aplerovitz concludes,
There is no question that the feasibility and efficiency of wealth owning through worker institutions has been demonstrated, and that the basic concept has substantial potential for future development.
Why do these firms succeed, while traditional cooperatives have struggled? Perhaps because they followed the advice of John Stuart Mill, who argued that a transition from capitalism to a form of socialism he thought was acceptable (not the revolutionary, command economy kind, for certain) would have to be achieved in stages. It would have to involve workers and capitalists working with and not against one another. Consequently, for a time every firm would have to go through a phase that was partially owned by workers, and partially owned by outside investors. There is absolutely nothing wrong with this in principle. There are however institutions, such as the US Federation of Worker Cooperatives (to name only one example), that also exist to provide cooperative start-ups with capital.
There was also the “Employee Ownership Act” of 1999, introduced by conservative Republican Congressman Dana Rohrabacher, that would have created a new kind of corporation, the Employee Owned and Controlled Corporation (EOCC). The bill stated “It is the policy of the United States, that by the year 2010, 30 percent of all United States corporations are owned and controlled by employees of the corporations.”An EEOC would have had the following charactertistics:
- Employees would own at least 50% of all voting stock in the form of an employee trust. At least 90% percent of employees who worked more than 1000 hours a year would have to be allowed to participate in this trust.
- Employees would be allowed to vote on all corporate issues, including board elections.
- Distribution and valuation rules correspond to existing ESOP rules.
The bill had both Democratic and Republican co-sponsors but unfortunately was never debated or voted upon by Congress; my hope is that this legislation will come up again. Imagine that! Legislation from both parties achieving something useful and necessary for the struggling American worker. That it came up it all, and that a conservative Christian Republican introduced it, is one of the most positive signs of a transformation in economic thinking on the right I have seen. It gives me great hope that traditional moral values and progressive economic ideas can eventually form the basis of a new political alignment in the United States.
These ideas, in whole, also accord well with Catholic social teaching, which seeks to avoid class conflict while encouraging greater worker participation in businesses, which, in the end, tends to reduce class conflict. Of course (and no one ever argued to the contrary) worker ownership of businesses is not “morally obligatory”, but we would be a sorry religion indeed if we confined ourselves to only that which is.
Four of the great Papal encyclicals on social and economic issues – Rerum Novarum, Quadragesimo Anno, Mater et Magistra, and Laborem Exercens – have renewed the argument for both the utility and moral superiority of the distribution of ownership. John Paul II consistently argued for the primacy of labor over capital, of the human element of production over the technical. To say that they mention it “on occasion” is an understatement; they mention it whenever they wish to say something important and long-lasting to an international audience.
With so many grave threats to the unsecured, isolated worker – with family and community in many places in a state of disrepair – it is in the immediate interests of millions to seek out ways in which they can maximize their gains and minimize their losses. A reasonably regulated economy based on the spread of worker owned firms offers less of a certain promise of great gains for anyone – meaning, few will likely become billionaires – but certain gains for all, and more importantly, the security and protection of an economic community when rough times inevitably come.
Communities rise or fall together, so everyone in the community has an interest in maintaining it. The same can scarcely be said about businesses which are simply in, but not of, a community. It is better to have a large family than to be single in a time of crisis; no one will disagree with that (I hope). It is better because individuals in families look out for one another. It is also good, for the same reason, for individuals and families both to be members of communities. Not geographical proximity, nor as a simple idea in the mind, but through real, material, concrete bonds whereby the development of each is the condition for the development of all, and vice-versa. This is why the Compendium of the Social Doctrine of the Church declares:
A business enterprise must be a community of solidarity, that is not closed within its own company interests. 
And, as, Aristotle said,
Property should be in a certain sense common, but, as a general rule, private; for, when everyone has a distinct interest, men will not complain of one another, and they will make more progress, because every one will be attending to his own business. And yet by reason of goodness, and in respect of use, ‘Friends,’ as the proverb says, ‘will have all things common.’
Not everyone can be expected to stop playing the lottery in exchange for a greater degree of economic security, but I think there are enough Americans who reject the notion that their goal in life is to appear on MTV’s “Cribs” to make these ideas spread even further than they already have. Catholics ought to certainly be among them.