The ESOP Phenomenon and Democracy in the Workplace
WORKING DRAFT
March 12
Frances A. Viggiani, PhD.
College of Business
Alfred University, Alfred, NY
viggiani@alfred.edu
917-656-9234
Introduction
brief history of the topic; major studies
Robert Dahl, 1989, Democracy and Its Critics:
“I have no doubt that may people will immediately reject the idea of extending
the democratic process to business firms as foolish and unrealistic. It may
therefore be helpful to recall that not long ago most people took it as a matter of
self-evident good sense that the idea of applying the democratic process to the
government of the nation-state was foolish and unrealistic. This foolish and
unrealistic idea was rejected on the one hand by antidemocratic elites throughout
the world who thought it obvious that wisdom and realism required some form of
guardianship; and on the other by many advocates of democracy, a tiny minority
at best who contended that democracy on such a large scale was, as had been well
known to all right thinking people for several thousand years, flatly impossible”
(1989: 328, emphasis added).
organizational systems is my topic – participatory systems
Since the 1960’s in the US, the idea of workplace democracy has been primarily
discussed as a bottom-line topic – and without use of the term “democracy”: the point
being, in a competitive, capitalist environment, to be able to argue that there is a useful
(i.e. profitable) outcome to higher levels of worker “participation” in organizational
systems, such that “employees” are able to experience increased control over the
conditions of work. Why would companies want this? Social scientists, in the context of
business schools since the 1940’s Human Relations school, have attempted to show that
that the motivation of employees – and hence their productivity and profitability for the
firm – will be positively affected by increased participation in managerial decisions about
work processes and conditions (for example, pace of assembly line; schedule of work
breaks; application of ideas for improved production processes).
At the same time, since the political activism in the US during the Depression,
and the development of labor relations models in the US context, labor-management
interactions and systems have generally down-played the idea of democracy in the
workplace, except to the extent that labor laws protecting work rights as against
employers’ rights, were considered just and equitable. The goal of union take-over, or
worker-ownership of a firm, has generally NOT been a part of this model. Indeed, the
topics of participatory management and labor-management have generally been avoided.
As a 60’s/70’s thinker, who absorbed the ideological environment of the Port
Huron Statement by Students for a Democratic Society, who helped to found and manage
grocery coops, lived in and had friends living in residential communes and collectives, I
now am searching for a way to communicate about phenomena which are prevalent
throughout the globe, and which follow, at least to some extent, ideas specifically about
democratizing work. For an American business scholar this requires a definition of
terms, and a discussion of organizational systems and behavior, that are generally so far
unexplored.
1.
Proliferation of employee ownership: major studies & findings in 3 countries
US
Blasi, Kruse et al (2002, 2008, 2005; Logue & Yates (2008)
claim: 20% of US workforce owns jobs through several vehicles
UK
Andrew Pendleton (2001, 2008)
two main points re: “small group of ESOPs in the UK”: 1)
considerable diversity viz: circumstances of creation; reasons for formation; actors
involved in conversion; levels of employee ownership; participatory and governance
institutions; 2) objectives, philosophies, and interests of key actors have critical
influence on level of share holding, and forms of participation and governance.
Ireland
D’Art & Turner (2006)
In Ireland profit sharing/employee share ownership has become of interest in
context of national wage agreements. Government, employer and trade union support
mean Ireland experiences “favourable conjuncture” (Pendleton, 2001).
However, profit sharing instances are not growing in a clear, evolutionary pattern,
and are somewhat related to business cycles, but overall (examples: 2002-2004, 41 new
share ownership schemes approved; proportion of employees in private sector covered
by approved profit sharing schemes declined from 11.7% in 1999 to 5.9% in 2001).
1.2
people/organizations promoting ESOPs
Blasi et al
Rutgers center
Rosen
National Center for Employee Ownership, CA
Logue et al
Ohio Employee Ownership Center
Oakshott et al Job Ownership Ltd, London, UK
Pendleton et al York Univ, UK
Turner et al
U. of Limerick, Ireland
2.
“A Democratic Workplace”: Definitions and considerations
Where is it written?
excerpts from:
Magna Carta (Great Charter of Freedom) - 1215
US Declaration of Independence - 1776
Norwegian Work Environment Act – 1977
Selected theoretical topics re democracy:
i)
liberty
ii)
equality
iii)
happiness
Selected technical issues re the firm:
i)
ownership
ii)
“employer v. employee”; (“capitalist v. worker”; “entrepreneur”v. job
holder; exploiter/oppressor v. wage laborer)
iii)
3.
representation; decision-making
ESOPs as democratizing force/influence?
i)
Pendleton’s four types: re participation and governance in ESOPs and
findings:
representative: participation leads to “substantial advances in employeeowner governance”
paternalist: “some innovations in shareholder representation; little
impact on governance
risk-sharing: few developments in participation or governance
technical: no innovations
re attitudes: “capacity for employees to participate in decision-making has
a critical influence on whether they feel like owners…[and also] the level
of individual shareholdings also has an impact on employees’ sense of
ownership” (2001 p. 17)
ii)
Take an example: Mondragon. Is more democratic? Obviously. But if all
we measure is whether more democratic companies are more profitable, we are not
answering the question of democratization. Instead, we have to premise the research
questions on the condition of citizens at work: are they more free? Are they more equal?
Are they more fairly represented? Are they treated more justly? Are they happier?
If we compare Mondragon with Nike in China; with Monsanto in Indonesia;
with Toyota in S. Carolina, in all of these cases, Mondragon would likely be found to be
more democratic. If we ask about a 25% ESOP in a company, clearly, the answer is: no.
However, if, in the aggregate, 20% of American workers own some part of their job, this
is an increasing re-definition of employer-employee relationships, structures, laws and
constitutes an historical shift. To the extent that this transforms citizens’ rights to control
the fruits/products of their work in emancipatory ways, and moves beyond laws that had
prevented such control, democracy is expanded. Clearly there are limits, and rejections –
as in Norway and Sweden – of legislative changes
4.
“Why not?” Why are there not more?
i)
ideologies of management
example of HR college textbooks (US) – French (2007), extensive discussion of
incentive pay programs, including ESOPs
note: a new Clashing Sides book on HR coming out this year
ii)
“reform or revolution”
“emiseration” is not happening in the US, by and large – certainly is not discussed
(labor movement?); low impetus for large scale confrontations over ownership issues;
however there is a slow change process happening, as more and more companies use,
under either “benefits” or “compensation” rubrics, supposedly motivating gain-sharing,
profit-sharing or stock ownership schemes. One could argue that these will eventually
become important, as the scale increases.
“freedom” for many Americans is related to the narrative of citizens in “the land
of the almost rich” in a “free market competitive economy”: individual success is based
on efforts of a poor/working class person being able to succeed by building a business
and becoming wealthy; legislation supporting group, community, collective, societal
goods would be seen as impeding the individual actor’s paths to success.
iii)
Dow’s arguments
iv)
Chris Mackin’s arguments
v)
Julie Graham - new mode of production within capitalism
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