Re: What we need to do to attract Unions to employee ownership

[Shann Turnbull <sturnbull@mba1963.hbs.edu>]

The response by Don Ward that I may not agree with him is puzzling as I do
not see any conflicts in our statements and no reason for a disagreement.
Might it be that I did not explain my alternative approach to ESOPs
sufficiently clearly?  Please let me know if this is case to clear up any
misunderstanding.

I see my alternative proposals of introducing an automatic transfer of
ownership rights, over say a 15 year period, from investors to employees,
customers and suppliers as supporting Don's concerns.  It provides time to
develop an ownership culture, not only with employees, but with the other
strategic stakeholders on whom the business depends for its existence.

We need to educate not only Union Leaders but all citizens that the
existing rules of corporate capitalism are inefficient and inequitable as
they allow investors to get overpaid and WE DO NOT WANT TO PUT UP WITH IT
ANY LONGER!!!!   

The solution is to distribute the profits in excess of the incentive to
attract investors (i.e. surplus profits) to the strategic stakeholders by
distributing ownership.  Not by the re-distribution of corporate income
through taxation before the investors obtain a competitive return which
creates a disinsentive for investment.   

ESOPs, CSOPs, and similar credit based techniques represent "band aid"
solutions in comparison as (a) they ignore and perpetuate the problem of
investors getting overpaid and (b) are concerned with only incremental
distribution of ownership to employees and not ALSO to other stakeholders
who provide the basis for a business to exist and add value to society.

Regards

Shann

At 01:30 PM 26/11/1999 , you wrote:
>Shann Turnbull:
>
>Thank you for expanding the debate. I had Thanksgiving guest arriving so I 
>could not make my final point.
>>From having observed many employees, managers, union officials and educators 
>in manufacturing, health care and secondary and post secondar education, I 
>have concluded that ownership starts as an attitude or point of view. Some 
>employees have that attitude, some do not. It can be nurtured by a 
>particpative management style and be stifled by an authoritarian management 
>style however some degree of the management attitude doews seem to come from 
>the individual and their taking pride in their own work and the strong need 
>to 'OWN' their position. Shann, if you can accept that it seems to ease 
>right into your own comment about other approaches. Others inclluding you  
>might not agree, which is your
>right and I woud willingly listen to their point of view. AS one of our ESOP 
>professional supporters told management one time "What our company needs is 
>owners not renters." UNfortunately, we could not keep up with that 
>individuals need to move ahead and she is now working in another company 
>which also seeks her input.
>
>Sincerely yours,
>
>Don Ward
>
>
>>From: Shann Turnbull <sturnbull@mba1963.hbs.edu>
>>Reply-To: EOpriv@cog.kent.edu
>>To: EOpriv@cog.kent.edu
>>Subject: Re: What we need to do to attract Unions to employee ownership
>>Date: Thu, 25 Nov 1999 10:39:38 +1100
>>
>>I would like to take up Don Wards point that:
>>
>>"I think the debate needs to move beyond the role of union leadership to a
>>recognition that ownership is a desired
>>objective regardless of whether a union is involved."
>>
>>The problem with the discussion is that it is based on the assumption that
>>the expansion of ownership and control depends upon the use  of ESOP's,
>>CSOPs, etc.  If other approaches are entertained then new possibilities 
>>arise.
>>
>>As I have stated in the Economics of Ownership discussion, the corporate
>>rules of ownership and control are inefficient and inequitable and WE
>>SHOULD NOT PUT UP WITH THEM ANY LONGER!
>>
>>Rather than providing tax incentives to encourage the spreading of what is
>>usually LIMITED ownership through ESOPs it would be much more revenue
>>efficient to use tax incentives to change the corporate rules of the game
>>to automatically spread ALL corporate ownership and control to ALL
>>stakeholders.  This would give political and economic legitimacy to union
>>initiatives through representing a very broad constituency of society.
>>
>>The reason why this approach is more tax efficient is indicated in my
>>article "Stakeholder Governance:A cybernetic and property rights analysis'
>>available from the COG library
>>http://cog.kent.edu/lib/turnbull6/turnbull6.html  It shows that the value
>>today of obtaining an annual income in perpetuity of $1.00 is only $5.00
>>when money can be invested to earn 20% p.a. from other equity investments.
>>  The tax incentive required to compensate an investor for losing ownership
>>of all income after fifteen years is a one time incentive today of 3.25
>>cents.  ($5x6.5% in Table 2).  If the corporate tax rate was 50% then a
>>$1.00 after tax income would require $2 of before tax income.  To increase
>>the after tax income 3.25 cents to $1.0325 the tax rate would only have to
>>be reduced to 48.375% for one year.  In practice a higher incentive could
>>be provided and would be needed to compensate for any expectations of a
>>growing income stream.
>>
>>The creation of Ownership Transfer Corporations (OTCs) by this means would
>>allow workers to accumulate additional property income over their working
>>lives and additional retirement assets/income from all OTC companies they
>>worked for during their working life.  As the property income would be
>>additional to their normal employment income and retirement benefits, the
>>need for diversification would be reduced and in any event, their income
>>sources would automatically become diversified as (i) they acquired
>>ownership interests as suppliers and/or customers of other OTCs and (ii) as
>>they changed employment over their working life.
>>
>>This proposal would also localised ownership and control to allow
>>communities to improve the ecological sustainability of their communities.
>>It is this proposal that I ask COG to consider putting forward to the WTO
>>so that globalisation can promote localisation to develop the social as
>>well as the economic capital of communities.
>>
>>Regards
>>
>>Shann
>>
>>At 05:49 AM 25/11/1999 , you wrote:
>> >Deborah:
>> >
>> >Good summary of how union leaders do and do not embrace employee 
>>ownership.
>> >I agree with all you said, however, I think the debate needs to move 
>>beyond
>> >the role of union leadership to a recognition that ownership is a desired
>> >objective regardless of whether a union is involved. In my own case, our
>> >company convinced our employees that they would be better served not to 
>>be
>> >represented by a third party years before we set up our ESOP. So my
>> >suggestion is that we concentrate on how ESOP's help all employees not 
>>just
>> >one group.
>> >
>> >Your reference to unions who did accept ownership as a last resort 
>>reminded
>> >me of Northeast Ohio, where I first got a look at how  well unionized
>> >companies could adapt to an ownership culture. Unions have come a long 
>>way,
>> >since I did picket duty during my college years.
>> >
>> >On the matter of ESOP's selling out and distributing the wealth to the
>> >employee owners. Our company president always supported this idea, if 
>>that
>> >is what the employees decided to do. However, anyone who bought a company
>> >like ours would probably buy it for the markets and sell off the
>> >manufacturing capacity. Employees would end up with a little money in 
>>their
>> >pocket but no job.
>> >
>> >Then there is the social side of work. So long as employee owners feel 
>>their
>> >contribution is asked for, they have good bosses, friends at work etc. 
>>why
>> >would they want to throw it away for the proverbial 30 pieces of silver.
>> >
>> >Speaking from personal experience, it did make me think, as I appproached
>> >retirement that  much of my retirement was tied up in the ESOP, or other
>> >company stock, I owned directly. At some age I could have diversified my
>> >ESOP but as a member of senior management, I did not want to send out the
>> >wrong signal.
>> >
>> >The age for diversifying would specifically be known by others in our 
>>group.
>> >However, if that provision could somehow be liberalized, it might lessen 
>>the
>> >need for employee owners to sell because of the diversification.
>> >
>> >Our Thanksgiving group is starting to arrive, so I will sign off. Would
>> >appreciate your and others thoughts.
>>
>>Shann Turnbull
>>P.O. Box 266 Woollahra, Sydney, Australia, 1350
>>Phone: 02 9328 7466 office; 02 9327 8487 home
>>Fax: 02 9327 1497 home & office.  Mobile 0418 222 378
>>Outside Australia, replace first "0" with "61" after international access 
>>code
>>Life long E-mail: sturnbull@mba1963.hbs.edu
>>http://www.mpx.com.au/~sturnbull/index.html
>>
>
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Shann Turnbull
P.O. Box 266 Woollahra, Sydney, Australia, 1350
Phone: 02 9328 7466 office; 02 9327 8487 home
Fax: 02 9327 1497 home & office.  Mobile 0418 222 378
Outside Australia, replace first "0" with "61" after international access code
Life long E-mail: sturnbull@mba1963.hbs.edu
http://www.mpx.com.au/~sturnbull/index.html