TO PRESERVE JOBS AND COMMUNITIES:

The Time Has Come For Worker-Owned Companies

by SCOTT LAWRENCE

THE UNWRITTEN SOCIAL CONTRACT between companies and the communities that originally nurtured them has been broken. Gone are the days when owners and managers lived in the community, had a vested interest in the health of the community, and felt an obligation to their employees and members of the community.
Capital has become mobile on an international scale. The new multi-national companies owe no allegiance except to a rather nebulous "shareholder base." This new breed of employer is interested in short-term profits, and seeks out the lowest wages and least onerous environmental, health, and safety regulations.
Companies are forced to pursue short-term financial results to satisfy investors. Those that choose to sacrifice these short-term results in order to make long-term strategic investments in research and development open themselves up to attack by corporate raiders, and to possible devaluation of their stock.
American manufacturing has thus lost its competitive edge by failing to invest adequately in new plants, equipment, research and development. Without such long-term investment, however, American industries are finding themselves forced to compete by becoming low-cost producers rather than growth-oriented and risk-takers.
They are ignoring their most important asset, the accumulated skills and experience of the workforce. Management in Japan, Germany and the Scandinavian countries see skilled labor as a valuable asset. By investing in, and partnering with, labor they have been able to displace U.S. manufacturers as the quality providers of high technology products.
Having positioned themselves in this low-cost niche, many U.S. companies are ultimately forced to abandon their American employees as they move offshore to seek even cheaper labor. Those manufacturing jobs that remain in the U.S. are experiencing declining wages.
Against this background it is not surprising that U.S. manufacturing has been characterized by poor labor relations and an "us-versus-them" attitude on the shop floor.
We need to find ways to bring back manufacturing jobs. If they can be created and retained, secondary service jobs will follow, and enough wealth will be generated to have a significant impact upon local economies (e.g., people with good jobs can afford housing.) We need a new kind of manufacturing company that is:

THIS IS NOT A DREAM

This may sound like a dream, but in fact such companies actually do exist. They're worker-owned companies whose ownership is vested in their workers. These workers live in the communities where their companies are located. Such companies can therefore be expected to make very different decisions from those companies that are owned by absentee shareholders.
Local owners, with a long-term interest in jobs for themselves and their children, have a vested interest in producing lean, efficient companies that make appropriate investments in research and development to ensure their companies' long-term survival. Self-interest ensures that worker-owners take into account the impact of corporate decision-making on the community. They are less likely to move operations to other communities and more likely to create safe workplaces and implement environmentally sound processes.
Worker cooperatives are businesses in which the workers have direct one-person, one-vote control over their business, providing a true break with traditional corporate structures. Studies have shown that they not only generate more worker satisfaction, but often greatly improve production efficiency.
While they still constitute a tiny fraction of American companies, worker co-ops are steadily demonstrating their viability in the marketplace.
It's not worker participation alone that leads to greater productivity. Rather, it's holding real decision-making power that drives worker-owners to make these ventures successful, according to studies tracked by the National Center for Employee Ownership (NCEO). While participation without ownership tends to to produce only short-lived or ambiguous benefits, worker ownership appears to provide the fuel to keep participation going. Ownership without participation, however, has little if any effect on performance. A 1987 U.S. General Accounting Office (GAO) study found that Employee Stock Ownership Plans (ESOPs) had no impact on profits. But firms that are managed in a participatory way and are worker-owned increase their productivity growth rate by an average of 52% per year, according to the same GAO study.
NCEO confirms, "We can say with certainty that when ownership and participative management are combined, substantial growth results. Ownership alone and participation alone, however, have, at best, spotty or short-lived results.

THE MONDRAGON EXAMPLE

The most impressive example of a worker cooperative is Mondragon Corporacion Cooperativa (MCC), begun in 1956 in the Basque region of Spain. From one small business, Mondragon has developed into an integrated system of nearly one hundred firms, employing 23,000 worker-members in high-growth and high-technology industries. Each worker-member has to invest $4,000 in the cooperative, and that investment is returned to the worker on retirement.
Mondragon now has its own bank with nearly one billion dollars in deposits, its own year-round training school, cooperative housing and 100,000 members in its consumer cooperative retail stores.
Statistics show the Mondragon cooperatives to be twice as profitable as the average corporation in Spain, with worker productivity surpassing that of any other Spanish organisation. It is focused on social success, involvement of the people and industrial democracy.
Simply stated, worker ownership aligns the interests of the corporation with those of the community. This is not an untested hypothesis. Numerous studies have demonstrated that worker ownership, coupled with a program of significant worker participation and involvement, substantially increases a firm's productivity. Worker-owners are prepared to sacrifice short-term gains in favor of investments in capital expenditures, research and development, etc., that ensure a company's long-term competitiveness.


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This story was published on July 3, 1996.