Worker-Owned Firms

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Gar Alperovitz:

"That individuals work harder, better, and with greater enthusiasm when they have a direct interest in the outcome is self-evident. The obvious question is: why aren't large numbers of businesses organized on this principle? The answer is: roughly 11,000 are. Indeed, 11.2 million Americans now work in firms that are partly or wholly-owned by the employees, three million more than are members of unions in the private sector (Bureau of Labor Statistics 2008, Table 3; National Center for Employee Ownership 2008).

Appleton (Co.) in Appleton, Wisconsin (a world leader in specialty paper production) became employee-owned when the company was put up for sale by Arjo Wiggins Appleton, the multinational corporation which owned it—and the 3,300 employees decided they had just as much right to buy it as anyone else (Appleton Ideas 2006, Dresang 2001). 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, chose to sell to the employees instead (Case 1992). W. L. Gore—the maker of Gore-Tex apparel—has been owned, since 1974, by (currently 8,000) worker-owners in 45 locations around the world (W.L. Gore and Associates, 2008).

Although there are 300-500 traditional worker co-ops, most worker-owned businesses are organized through "Employee Stock Ownership Plans" (ESOPs). Technically an ESOP involves a "Trust" which receives and holds stock in a given corporation on behalf of its employees. What is positive about this mechanism is that it offers major tax benefits for the creation of large numbers of worker owned firms—especially when an original owner retires and decides to sell to the employees. What is negative is that although there are exceptions, in the main the ESOP form is not at this stage organized democratically.

Several considerations suggest, however, that greater democratic control of ESOPs is likely to develop: First, many ESOP companies — more than 25 percent according to one report (Wirtz 2007)—are already majority-owned by workers. Of these, the National Center for Employee Ownership estimates 40 percent already pass voting rights through to plan participants. Second, as workers accumulate stock their ownership stake tends to increase. Annual ESOP Association member surveys indicate that in 1982 only 20 percent of ESOP Association member companies were majority ESOP-owned companies; by 2000, that figure was 68 percent (Democracy Collaborative 2005: 59). It is conceivable that as more and more ESOPs become majority-owned, workers will simply ignore the fact that some have little power. On the other hand, the more likely probability-as Business Week observed in 1991-is that ultimately workers "who own a significant share of their companies will want a voice in corporate governance." In Ohio a survey completed in the mid-1990s found that employee ownership was becoming more democratic over time, with three times as many closely held companies passing through full voting rights to ESOP participants as had occurred in a previous 1985-86 survey (Business Week 1991, Logue and Yates 2001)." (

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