Employee Ownership– Shrinking Income Gap Between Capitalists and Workers: Illusion, Scam, or Employee Capitalism…

World of Employee Ownership: What’s the one thing that– Pope Francis, Barack Obama, Marco Rubio, Warren Buffett… All agree on? Yes, they say; all workers must have ‘fair share’ in company success, including; profits, productivity, prosperity…

But the big question is how? Proponents say it’s through ’employee (worker) ownership’ that employees can be enriched from company success (beyond just wages and benefits)… but critics say that most employee ownership plans are– illusions, scams, and they don’t work…

Typically, a ’employee ownership’ plan refers to ownership for a broad cross-section of employees, including; rank-and-file employees… generally the plans offered by companies, include; employee stock ownership plan (ESOP), or employee stock purchase plan (ESPP), or 401(k) plans, which may offer company stock as an investment alternative…

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However, the word ‘ownership’ has a myriad of meanings in the minds of employees, e.g.; according to one survey employees (workers) likely to define ’employee ownership’ using some combination of the following meanings:

1.) Financial Payoff: some workers see ownership as a financial benefit, and as owners they expect at some point to receive cash value…

2.) Participation: some workers want to be included in the decisions that affect their day-to-day work, and they want to have a voice on issues that affect working conditions…

3.) Influence: some workers want to have a part in broader, company-wide decisions, and they want a degree of influence on strategic issues…

4.) Community: some workers want to feel a bond with their fellow owners, and they want to feel that the whole company is– ‘in it working together’…

5.) Fairness: some workers primarily want to be treated fairly, and they want sensible rules without ‘special treatment’ for the CEO or other management…

Over 13 million U.S. employees participate in ESOPs, about 9 million hold stock options, and about 11 million participate in stock purchase plans; there is some overlap in these various plans, which means that there may be approximately 25 million employees in the U.S. (out of a non-governmental workforce of over 120 million) participating in broad-based employee ownership plans… and this is within thousands of corporations both large and small…

The main benefit of employee ownership is that it gives employees the ability to benefit or lose from the fluctuations in value of a company’s stock… Companies that adopt employee ownership plans find, and research confirms, that a more participative and sharing approach to company management makes for a much more productive workplace, and higher probability for success…

In the article When Workers Are Owners by The Economist writes: It’s popular to lament the growing gap between capitalists and workers but, in one respect, the gap is shrinking: The number of workers who own shares in the company that employs them has never been higher; 32 million U.S. workers own stock in their companies through– pension and profit-sharing plans, share-ownership, share-option schemes… and the idea continues to gain momentum…

Conservatives like employee ownership because it gives workers a stake in the capitalist system… Left-wingers like it because it gives them a piece of the capitalist pie… And middle-of-the-roaders like it because it helps to close a potentially dangerous gap between management and labor… A number of studies have found that companies were employees have some level of ownership tend to be more productive, innovative, less staff turnover…

However, employee ownership has its drawbacks, e.g.; one issue is risk, when workers have too many eggs in one basket (i.e., entire wealth is tied only to their company equity)and should the company fail or significantly decrease in share value, then employees can lose it all– investments, pensions, jobs… A second issue is entrenchment: Supporters of employee ownership argue that it helps companies take a more long-term perspective… whereas, critics argue that it can entrench underperforming workers or bad management and undermine company’s long-term competitiveness…

A third issue is entitlement:The strongest argument in favor of employee ownership is that workers will not only work harder, when they get a slice of profits or other benefits, but they encourage colleagues do so too… However,  the success of an employee ownership greatly depends on the way it’s  structured, and motivations behind its adoption… There are many positive reasons for employee ownership, but much attention must be paid to– its purpose, fairness…

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In the article Turning Workers Into Capitalists by z.m.b. writes: There is a depressing familiarity about much of the discussion on what to do about U.S.’s widening income inequality. Some remedies are not controversial but hard-to-achieve (e.g.; improving education); others are the subject of furious argument (e.g.; more progressive taxation). Once in a while, though, more creative, proposals are added to the mix…

According to Joseph Blasi and Douglas Kruse, in their book ‘The Citizen’s Share’ they say; countering the workers’ declining share of national income is simple; just encourage companies to give workers more and broader participation in company issues, including; sharing in profits and other tangible financial benefits… the key issue is to improve worker status, financially… and the exact mechanism depends on the company and the workers– and they must decide whether it’s through– profit-share, stock ownership, stock options… there is no one-fits-all solution…

The logic of employee ownership (or worker capitalism) is not new, e.g.; the New England ‘cod fish’ industry in 1792 signed a profit-share agreement with their crews and also split the federal ‘allowance’… in 19th century, ‘Homestead Acts’ gave land free (ownership) to those willing to work the land… In 1974, ‘Industrial Homestead Act’ created ‘Employee Share Ownership Plans’ (ESOP), tax-advantaged trusts through which companies can provide employees with share-ownership… Through these and other initiatives; a large numbers of workers share in their companies’ success (but, critics say not enough is shared). Critics are quick to say when schemes are structured such that– ownership comes at the expense of lower wages, then workers may simply be shifting from a stable and liquid form of compensation to a more risky one…

In the article How to Shrink U.S.’s Income Gap by Thomas A. Kochan writes: Business and government must find new approaches for rewarding workers for their contribution to the success of business… the objective should be to find a sweet spot where all workers, who through their efforts improve the value of business, should also share in the profits and equity value of the business…

A place to start is with greater worker participation, e.g.; open new avenues of communication so that workers have greater voice, representation; initiate worker councils where all employees have a right to participate in discussions of wage and other human resource policies; develop options for various types of employee ownership… The basic objective is to establish a fair work environment where workers  and management share, fairly, the gains of their labor…

Today over 12,000 ‘Employee Stock Option Ownership Plans’ (ESOPs) are in place, and in some form or other engage employees as owners… the plans that work typically follow a specific set of principles, e.g.; build a company culture of shared ownership, commitment that motivates everyone to work together, benefit together from success of the company… Define career paths– promote and pay employees for obtaining new skills and engage in life-long learning with opportunities to move-up the income ladder as careers progress…

Retrain and redeploy– when workers are displaced due to advances in technology; there must be options e.g.; retrain affected workers with skills needed for new available jobs, or provide generous severance pay that allows them to find suitable jobs elsewhere… Income fairness is a critical issue for most companies, it’s imperative that some workable solutions are found to improve the situation…

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Research over the last 25 years is clear; meaningful employee ownership can motivate employees and improve company performance… Companies must make a greater effort to seek out and address the fairness concerns of employees and not just listen– they must  act with positive initiates that changes policy, or at least communicates the rationale behind the policies which are perceived as unfair…

In most companies, workers equity stakes are relatively small compared to management… These plans must be improved with greater employee participation… also, government must provide more generous incentives to encourage companies to expand employee ownership… and companies  must be more generous in the structure of employees ownership plans… 

Employee ownership is ‘glue’ that ties worker ‘wellness’ together in coherent program,  e.g.; bonuses, equity, performance initiatives, safety issues, training, benefits… However, none of the well intended initiatives succeed without employee (worker) participation– employee participation is key: Finding a systematic and safe way for workers to express what ownership means to them allows companies to tailor features of an ownership plan to satisfy the particular needs of their work force…

Linking change to employees input can be just as important as the change itself… Hence, begin the debate– workers, companies, government must work together and find, or invent, new ways to encourage everyone– to ‘work’ together, and to ‘gain’ together, and ‘prosper’ together: Fairly.