March 14, 1996

Business Week Lauds United, Questions ESOP Growth

NCEO founder and senior staff member

In a March 14 cover story, Business Week lauded the progress United Airlines has made as a participative, employee-owned company. The article pointed out how work teams throughout the company have saved huge amounts of money. For instance, a cross-functional team of workers saved $20 million a year by figuring out how to power airplanes idling at the gate without turning on the engines. Sick leave has dropped 17% and workers compensation claims costs are down 30%, both a result of employee team ideas. Operating revenue per worker increased 10% in 1995, while employment increased. Other airlines showed smaller gains on this measure, but accomplished them through massive layoffs. Meanwhile, operating margins doubled and the stock price has gone up 120% since the buyout, compared to 46% for the S&P Airline Index.

United's success has not been widely imitated in other large companies, however. An accompanying article points out that there are few large ESOPs in major firms, and even where there are, the companies have not been as open to employee involvement as United.