Friday, March 19, 2010

Symposium on Shared Capitalism and Worker Appropriation

by Richard McIntyre, Ph.D.
Professor of Economics

The ongoing economic crisis in the U.S. and world economies has called the governance structures of both financial and non-financial enterprises into question. I organized a symposium at the recent International Labor Process Conference at Rutgers School of Labor Management Relations to bring together two strands of research on employee ownership and economic democracy.

Research on "shared capitalism" covers a variety of forms of worker participation and gains sharing that are already quite common in the US. The new research shows just how common these arrangements are – covering between a third and half the workforce – and effectively addresses longstanding concerns that such arrangements might not be competitive because of collective action problems.

The notion of "worker appropriation" grows out of a critique of socialism as central planning and public ownership of the means of production. Worker appropriation means that labor and not capital is the residual owner of the firm's net product. A case can be made that it is collective and democratic control of the surplus, with or without ownership and whatever the role of markets in society, that would most effectively address concerns about justice in the workplace, in the boardroom, and in the distribution of income.

Building on cases studies and statistical analysis of survey data these research programs tell us quite a bit about the potential economic and political benefits and costs of providing workers both more voice in management, as well as greater dependence on the financial health of their enterprises. They come out of different traditions in political economy and social theory, and while there were no tensions on our panel over this there were such tensions in the conference as a whole, which I will recount at the end.

According to Doug Kruse (Rutgers University) almost half of American private-sector employees participate in employee ownership, profit sharing, gain sharing, and/or broad-based stock options. He refers to these plans that directly tie worker pay or wealth to workplace performance as "shared capitalism." Such plans are often associated with greater employee participation in decision-making and information sharing, and may help increase worker pay, wealth, and quality of work life. More broadly, they have attracted interest for their potential to affect economic performance and societal income and wealth distribution. They can also, however, present serious issues of financial risk for employees, particularly if they substitute for other pay or wealth, and have the potential to worsen workplace relations.

Kruse's presentation was based on the National Bureau of Economic Research (NBER)'s Shared Capitalism Research Project. For an extensive view of shared capitalism, he put questions on the 2002 and 2006 General Social Surveys, containing representative samples of American workers. For an intensive view he conducted detailed surveys of over 40,000 employees in 14 companies with different combinations of shared capitalism plans, analyzing a wide variety of measures affecting workplace performance (e.g., turnover, loyalty, response to shirkers) and worker outcomes (e.g., pay, supervision, training, job security), with special attention to how shared capitalism may interact with other workplace policies. Shared capitalism is generally linked to positive outcomes for both workers and firms, with more positive outcomes when it is combined with employee involvement, training, job security, and above-market wages, and less positive outcomes when it is combined with close supervision. The results indicate that there may be significant potential for broad expansion of shared capitalism.

Erik Olsen (University of Missouri-Kansas City) discussed his research on the growth of majority employee-owned (MEO) enterprises in the U.S. Overall employee ownership in the U.S. has grown to the point where more than one in six workers currently own some equity in the company for which they work. The number of U.S. workers employed in firms where the employees of that firm own the majority of the equity has also grown rapidly. These enterprises add an additional dimension to shared capitalism because the employees have an enhanced degree of control over of the firm. These MEO firms range from worker cooperatives, which typically combine employee ownership with egalitarian principles and participatory management, to firms that are majority employee-owned but operate in ways that are not substantially different from conventional capitalist enterprises. In the U.S. there are currently several hundred worker cooperatives employing only a few thousand workers, but there are several thousand MEO firms with close to one million employees. Thus majority employee-ownership is no longer an ephemeral or utopian endeavor, but rather has become a viable, and increasingly common, way to organize an enterprise in the U.S.

MEO firms could conceivably support a different kind of industrial policy in the United States, to replace the war of the tax cutting states that only seems to impoverish everyone. It is plausible that MEO firms are less likely to outsource or offshore jobs, but no one has investigated this. Olsen recently received a Beyster Fellowship from Rutgers to conduct the first national survey of majority employee owned firms, so as to answer these and other questions

Daphne Berry (Doctoral candidate, Isenberg School of Management, UMass-Amherst)
and Stu Schneider (Cooperative Home Care Associates) examined the decision-making processes for allocating the net profit earned by one business that utilizes shared-ownership and participatory decision-making practices. Cooperative Home Care Associates (CHCA), currently the nation's largest worker-cooperative by employment, has developed an innovative process for determining the allocation of its annual net profit as: a) retained earnings; b) dividends; c) 401(k) plan contributions; and d) bonuses. While structured as a worker-cooperative, CHCA is actually a hybrid, also embodying some characteristics of a shared-capitalist enterprise. Because the work is dispersed across many sites and also because of the low levels of education of most of CHCA's 1,600 employees, some non-owner involvement is sensible in their opinion. However, worker-owners make final determinations regarding this surplus. Berry is a recent recipient of a Beyster Graduate Fellowship for this work and Schneider was able to give real insight into the practices used by CHCA to help its 1,600 home care workers learn about the company's finances so they can make informed decisions with respect to the annual vote on a proposed allocation of net profit.

Using her case study of Broadway musicians, Cathy Mulder (CUNY) argues that worker or collective "ownership" of the means of production may be sufficient but is not necessary for a democratic workplace. She gave concrete suggestions on how workers through their union might become the residual claimants to the firm's surplus with or without employee ownership.

Taken together these papers suggest the U.S. has a wide range of work organizations and that the possibilities for workplace transformation are much greater than is commonly believed. Worker ownership and cooperative production may be effective answers to the inefficiencies of traditional socialism as well as the inequality and social disintegration associated with market driven neo-liberalism. Whereas the standard political script seems to be a debate between those favoring more and those favoring less government, proponents of shared capitalism and worker appropriation say neither of these is the answer. Worker ownership in particular finds political support on both the left and the right of the political spectrum.

Our symposium came at the end of a long second day of conferencing and stood apart from the conference stream on "alternative work organizations" of which I had hoped it would be a part. This was especially unfortunate in that there was real tension in that stream between those interested primarily in worker cooperatives as socialist experiments in countries like Venezuela and Argentina, and those more interested in a variety of ways to increase worker voice in the very different political context of the United States. And while "shared capitalism" and "worker appropriation" share an emphasis on increasing worker voice they differ in their normative goals. Though we were not able to fully explore these tensions in the symposium, I intend to do so in a forthcoming paper in Employee Rights and Responsibilities Journal.

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