Worker ownership -- often a good cure for ailing firm
When about to be fired, consider buying the company. A growing number of union locals, whose financially troubled employers have threatened members with layoffs or reduced wages, are finding that option increasingly attractive.
The current recession and some expected help from Washington are fueling the fresh surge of interest in the idea, which dates back to the producer-cooperatives of the 19th century.
Congress recently passed legislation, now in conference committee, that will provide as much as $100 million a year in low-interest loans, guarantees, and technical assistance to workers and communities who want to buy out their employers -- as long as the project is judged economically feasible.
There is no question about the idea's appeal -- particularly in the main manufacturing centers of the Midwest and the Northeast. These areas have lost 1 .4 million jobs since the mid-1960s.
Proponents of the worker ownership say that in addition to saving jobs, the community keeps a stable tax base, and the taxpayer saves on unemployment, welfare, and other income transfer payments.
Other benefits, however, are considerably more debatable. For example, research to date shows a close tie between worker participation and productivity gains.
But one of the problems found with the 50 or 60 companies bought by employees over the last decade is a failure to think through the role of worker-owners in decisionmaking.
"There's often an initial fallback into the traditional adversary relationship," observes Prof. William Whyte, a specialist in this field who heads up a related research project at Cornell University's School of Industrial and Labor Relations.
"Our finding has been that, in general, workers are so happy to save their jobs that they don't expect [any further changes] and that management does not realize the potential benefits of shared ownership. The degree of promise offered depends . . . on whether management and workers have the potential for cooperative problem-solving once the ownership transfer takes place," he says.
"A worker-owned firm is a new organizational animal," adds Dr. Joseph Blasi, a lecturer in social studies at Harvard University and an adviser on social policy to Rep. Peter H. Kostmayer (D) of Pennsylvania. Mr. Kostmayer sponsored the low-income loan legislation in the House. It's not just switching the names on the shares."