Introduction: Why Ownership for All

Introduction: Why Ownership for All?

A Report on the COG Virtual Think Tank’s first 18 months of operation

Deborah Groban Olson,

COG Executive Director and Project Coordinator of the Ford Foundation/COG/OEOC Project

Globalization, as organized by and for global corporations, undermines local community cohesion. Is there a feasible, community friendly, alternative? The growing global trend toward employee and other broad forms of ownership provide possible solutions. The Capital Ownership Group is seeking means to develop and implement them. Ownership for All is the initial compilation of the first 18 months of work by the COG working groups.

The Capital Ownership Group (COG) is a non-profit network of and resource center for professionals, business, labor and government leaders and staff, academics and activists on six continents, working to broaden ownership to deal with the negative effects of globalization. COG is primarily funded by the Ford Foundation, and operates the Ford project from the Ohio Employee Ownership Center at Kent State University. Its program staff, also serving as the initial COG discussion moderators, include: COG Executive Director and Detroit based employee ownership attorney Deborah Olson and Ohio Employee Ownership Center Kent State University staff Prof. John Logue, Dan Bell, Steve Clem and Prof. Jacqueline Yates.

COG actively seeks partnerships with organizations worldwide. Our network is international because we are acutely aware that people in the developing and developed world may see these issues and proposed solutions differently. Viable, humane solutions must serve the interests all affected parties. To facilitate this global interchange we created the website which we refer to as our “virtual think tank” at www.capitalownership.org. It is our primary means of maintaining a growing number of global working groups. Whenever, resources permit, we organize live meetings. Our programs include: (1) an on-line conference center (hosting 11 working groups with 284 participants) enabling collaborative research and a forum for development of policy proposals and implementation efforts. (The site is navigable in English, Spanish, Russian and Chinese.); (2) an on-line library, including research reports, case studies, proposed legislation; (3) and a global outreach program hosting international strategy and policy meetings; seeking out and promoting research on the effects of broad ownership; and continuously seeking to expand links and collaborative relationships to include influential think tanks, constituency organizations, governments, agencies, etc. As of April 2001, COG’s web site has responded to over 240,000 data requests from people in 98 countries.

COG’s Mission is to create a coalition that promotes broadened ownership of productive capital, in order to reduce inequality of income and wealth; increase sustainable economic growth; expand opportunities for people to realize their productive and creative potential; stabilize local communities by improving living standards; and enhance the quality of life for all.

Ownership for All includes reports of the first six COG working groups. Each paper is a work in progress. Each discussion group is on-going. The on-line library includes many publications that are or have been under active discussion. Our goal is to develop policies, practices, implementation strategies and mechanisms to facilitate the creation of sound, practical means for local empowerment and economic self-sufficiency globally. Our current method is to expand the COG network to include all major organizations and policy makers concerned with those goals in working groups to develop the means to those ends.

Globalization is polarizing income and wealth^[1]. Capital concentration is increasing. Technology allows fewer workers to produce ever-increasing quantities of goods. A rising tide of productivity does not lift all ships, when low paid workers cannot afford to purchase the ever-increasing quantity of goods they produce. Corporations are no longer anchored to the countries that once determined the rules for corporate relations to social needs. Global companies are racing against each other to the lowest social wage.^[2] This race hastens global recession, when coupled with a significant overproduction of manufacturing capacity as companies chase the lower social wage to ever poorer countries at an increasing speed. Corporate investment in developing countries brings previously unavailable resources and opportunities. But, does a broad base of the local population benefit from foreign investment? Is there a way to strengthen local communities facing a global economy?

Most of the world’s nation-states now embrace the concept of political democracy, however flawed their implementation of it may be. This occurs just as corporations are eclipsing nation-states as world powers. Some global corporations are larger economic units and have greater influence than some countries. The WTO treaties and protocols focus on protecting the free flow of capital, if necessary, at the expense of control by local civil authorities. Communities are losing the means to protect local civil society interests if they conflict with corporate interests. Trade agreements like the proposed Multilateral Agreement on Investment (MAI), the Free Trade Agreement of the Americas (FTAA) and other World Trade Organization (WTO) treaties are like the Interstate Commerce Clause without the rest of the US Constitution (the parts protecting individual rights and the rights of states to legislate concerning local health and safety). Are we headed toward corporate feudalism?

COG proposes broadening ownership of capital assets, and employee ownership particularly, as one countervailing force to protect democracy. Just as political democracy is acknowledged as appropriate power sharing in modern civil society, so broad shareholder rights would spread economic democracy and create civil social control over corporations. While nation-states still have considerable power, it makes sense for them to use it to help their citizens obtain the franchise in corporations to maintain citizen control as we enter the period of corporate hegemony. Thus, COG is collecting and dissemination best practices and developing new policy proposals, to increase the visibility and utility of these tools.

Based on our experience, broadening capital ownership: (1) empowers individuals and families; (2) anchors capital and jobs in communities; (3) fosters enlightened workplace practices and enhanced education for workers; (4) develops a long term view on capital investment; and (5) creates an incentive for environmental responsibility.

The American model for broadened ownership, beginning with employee ownership, is attractive because it enables inclusion of workers, who own no capital assets, in ownership of new retained earnings, rather than redistribution of existing capital resources. It provides for a shift in the overall distribution of capital over time as the broad worker population learns new ownership skills. By shifting the distribution of capital ownership discussion, from redistribution of existing capital, to distributing the growth in the capital pie, Louis Kelso and Senator Long provided us a fair, peaceful and politically viable means to change the distribution of the ownership of productive assets.

Employee ownership is increasing throughout the world. While there were only a few hundred employee owned firms in the US in 1973 with a few thousand employees, there are now more than 11,000 employee stock ownership plan companies employing 9.5 million employee owners. Globally, most high technology companies provide stock options to employees. Ten to 15% of publicly traded companies in the US provide stock options to most of their employees. Approximately 100 multinational corporations now provide employee ownership to all their employees world-wide.^[3] Most of the formerly socialist countries have used some form of employee ownership to privatize their economies and western countries have used it to privatize formerly state owned business. Employee ownership has broad and shallow support from right and left, so it is politically viable in many countries and political systems. It also has great gut appeal to most people. Many business owners feel it is the right thing to do. There is great diversity of experience and opinion on the effects of these programs on local economies and the relative benefit provided to workers in various economic strata. Practitioners and participants in this global phenomenon have created the COG network to evaluate and promulgate best practices from this experience and to develop new policy proposals.

Ownership for All is a global anthology of experiences with employee ownership policies, practices, policy proposals and related debates. It summarizes the first six COG discussions. Thus far, the discussion groups have:

A few examples of the range of participants and collaborative activities inspired by COG follow:

Julia Markus of the Canadian Employee Share Ownership and Investment Association, who has been working with Canadian MPs interested in creating ownership broadening legislation, trades information with Carla Dickstein, Research Director of Coastal Enterprises Inc., and recent appointee to the Maine State Commission on Ownership, concerning ongoing efforts in Canada and Maine to develop new ownership broadening policies. Both of them use my proposals on providing sliding scale tax benefits based on quantity and quality of employee ownership, and/or communities insisting on obtaining a stock quid pro quo in exchange for government largesse to companies. These ideas have been discussed in a variety of forms in the COG Homestead group.

Various participants suggested looking at the Swedish Meidner proposals for countrywide share ownership through the pension system. Per Åhlström, currently executive director of the Swedish effort to create labor venture funds, and Prof. John Logue of Kent State University, provided both a description of and the political history of the demise of the Meidner Plan and new interest in labor venture funds in Canada, Sweden, the U.S..

Working economists (including among others moderator, Keith Wilde, a senior economist for the Canadian government pension system and Michael Harrington of the Milken Institute) who favor broad ownership have been debating with Louis Kelso’s devoted followers whether Kelso’s theories are useful to furthering the ends of broadening ownership in the practical world. David Ellerman, Economic Advisor, Development Economics for the World Bank, has propounded his residual claimancy theory regarding the allocation of property rights, and has made his new book available in the COG library.

Shann Turnbull, Australian investment banker and employee ownership theorist and practitioner, has provided numerous articles to the COG library and been an active discussant, propounding models for companies governed by stakeholders where investor rights are time limited and devolve to those who continue to create wealth for the company.

Vic Thorpe, Brussels based former General Secretary (and current Senior Advisor) of ICEM (International Federation of Chemical, Energy, Mine & General Workers’ Unions—21 million organized members in 350 member unions from 135 countries) runs a COG on-line discussion for labor leaders discussing case studies and labor issues concerning employee ownership. This is a new discussion and not reported in this version of Ownership for All.

Thomas Brandt, an economic development employee of the State of Hawaii provided an essay on his dream for Hawaii, and has proposed many tax, income and social security based ideas on broadening ownership.

Political Science Prof. Alan Zundel (University of Nevada), who created the Institute for the Public Good based on his interest in ownership based strategies to promote social justice, has proposed numerous non-employee ownership ideas for broadening ownership to the Homestead group, and has co-authored the Homestead discussion summary.

In addition to the initial discussions launched by the COG staff, participants have begun moderating a number of other discussion groups. These include: the India discussion, moderated by Umesh Gala, an accountant in Bombay, India; the Economics of Ownership discussion, moderated by Keith Wilde, an economist for the Canadian federal pension system; the Spanish language discussion section moderated by Maria Adela Oliveros de Miranda, Executive Director of RORAC, a Mexican community economic development foundation; and the Russian language discussion group moderated by Olga Klepikova, an OEOC staff member in Moscow, Russia; a discussion group for labor union leaders moderated by Victor Thorpe, the immediate past General Secretary of the International Confederation of Chemical Workers Unions (ICEM), headquartered in Belgium; and a discussion on employee ownership tax policy moderated by Aidan Langley, a partner in the London office of Deloitte & Touche who specializes in representing global companies in designing equity compensation programs. Participants are welcome to organize working groups around a variety of topics.

We hope this anthology will help people developing ownership programs, showing the breadth of the existing options, best practices and pitfalls to avoid. The on-going discussions are intended to bring together like-minded people who can help each other refine and strengthen existing best practices and implement new policy ideas. Please join us at www.capitalownership.org.

^[1] The factual assumptions underlying this analysis of globalization’s effects come from several recent books that outline the problem and some of the policy and action alternatives COG is seeking to actualize. The books are One World Ready or Not, the Manic Logic of Global Capitalism by William Greider, Simon & Schuster (1997), and The Ownership Solution, by Jeff Gates, Addison-Wesley (1998); a Ford Foundation funded study done by Bob Stumberg at Georgetown University Law Center and Bill Schweke at the Corporation for Enterprise Democracy “Work on Balancing Democracy & Trade”1999 on the effects on the proposed MAI on local economic development tools; The Crisis of Global Capitalism, George Soros, Public Affairs (1998). Some of these ideas also derive from the work of Louis Kelso and his followers.

^[2] “Social wage” meaning laws and policies which protect workers rights to minimum wages, safe working conditions, against child and slave labor, the right to organize unions and community environmental standards.

^[3] Corey Rosen, “Whither Employee Ownership?” Owners at Work Winter 1999-2000