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The Employee Ownership Update

Corey Rosen

November 16, 2009

(Corey Rosen)

United Steelworkers, Mondragon Cooperatives Launch Joint Agreement

The United Steelworkers and the Mondragon Corporation (the holding company for the Mondragon cooperatives) have agreed to a joint collaborative agreement for the development manufacturing companies in the U.S. that will be organized as worker cooperatives with steelworker representation. No specific projects are yet underway, but Mondragon has an impressive record of business development. Starting off as a handful of small worker coops in the Basque region of Spain, Mondragon now employs close to 100,000 people worldwide in over 260 cooperative enterprises in more than forty countries. It had 2008 annual sales of more than sixteen billion Euros and has its own cooperative university, cooperative bank, and cooperative social security system. Its entrepreneurship center helps new cooperatives get started. It has strict limits on the ratio of top management pay to the pay of other employees, but has been ranked as one of the most desired places to work among graduate business students. It is the largest Basque business group and the seventh largest in Spain.

A number of smaller efforts to emulate the Mondragon model have been attempted in the U.S., the largest of which is probably in the San Francisco Bay Area, where there are several very successful worked-owned cooperatives in a linked network, mostly in the food business. The Steelworkers have had considerable experience with ESOPs, many of which they helped organize to prevent plant closings in the 1980s. Experience on this was mixed. While a few have had considerable success, others closed anyway, while still others ended up being sold after some years. In the press release on the agreement, Steelworkers President Leo Gerard that the union "has lots of experience with ESOPs, but have found that it doesn't take long for the Wall Street types to push workers aside and take back control. We see Mondragon's cooperative model with 'one worker, one vote' ownership as a means to re-empower workers and make business accountable to Main Street instead of Wall Street."

Tribune Company to Drop ESOP

The ill-fated ESOP at the Tribune Company will be terminated and replaced with a new 401(k) plan with a 4% match for employee contributions of up to 6% of pay. The company also said it will institute a profit-sharing plan. While there had been discussion of keeping the ESOP through bankruptcy reorganization in the hopes of providing some value for employees, the complexity of doing that did not seem worth the effort. The ESOP is, however, still under investigation by the Department of Labor.

ESPP Survey Shows Participants More Committed

A 2009 survey of 3,207 participants in employee stock purchase plans (ESPPs) by Computershare and the London School of Economics found that employees in the plans said they were more interested in the company, worked harder, and were less likely to look for a job in the coming year than those not in the plan. The survey looked at employees in the U.S., U.K., Ireland, South Africa, and Australia. Participants in the U.K. and Ireland were the most likely to be more committed across a broad range of issues; U.S. participants were only more committed on certain issues. The survey found that plan effects were larger among those members with greater contributions and share holdings.

The authors summed up their findings from workers as follows:
"UK and Ireland - going the extra mile in their job every day, working above their contractual hours, increasing workers' own motivation, reducing absence rates, increasing sense of co-ownership and organisational loyalty.
USA - working above their contractual hours, increasing workers' own motivation, reducing the probability of quitting, reducing absence rates and increasing the sense of co-ownership.
South Africa - working harder than others and reducing absence rates.
Australia - working above their contractual hours, acting to reduce co-
co-workers shirking, reducing the probability of quitting, increasing sense of co-ownership and organisational loyalty."
The study cannot address whether people are more committed because they are in the plan or are in the plan because they are more committed. It seems likely, based on other research about employee ownership and motivation, that the second relationship is more powerful. Details on the study can be found at this link.

NCEO Board Nominations Now Open

The NCEO will hold its annual election for board members in January. We accept only self-nominations. Board members serve a three-year term at their own expense. The board meets in person during the afternoon and evening preceding the annual conference and the morning of the conference. In addition, board members serve on committees that help create projects, develop material for books and meetings, promote membership, and work with staff on finding funding for research projects. We seek members who will take an active role in NCEO affairs.

Nominees must be members in good standing. Send a 100-word statement to Corey Rosen at that we can use in the election ballot no later than December 15.

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