A Case for Worker-Owned Businesses

Posted on Dec 6, 2012

Workers4America (CC BY 2.0)

“At a time of high unemployment, soaring corporate profits and diminishing job quality, employee ownership offers an appealing, viable alternative to mainstream corporate capitalism,” writes Moira Herbst in The Guardian.

Worker ownership and direction are not just for Marxists. Democracy is a core American value that has been conspicuously absent from the nation’s economic practices for the last 200-plus years, and employee ownership honors it while maintaining the entrepreneurial spirit prized by free marketeers.

When workers profit directly from their labor, they’re more “motivated, productive and creative,” Herbst writes. Researchers at Harvard and Rutgers, she points out, found that “companies with substantial employee ownership often outperform those without, because of lower staff turnover and stronger trust relationships at work.”

Employee ownership is far from the norm in the United States today, but the number of partially worker-owned businesses has risen since 1975 from 1,600 to more than 10,000, representing roughly 10 percent of the American labor force.

“We sorely need these alternatives,” Herbst writes. “For a nation fixated on the idea of individual liberty, Americans have a remarkable tolerance for undemocratic, top-down leadership at our workplaces, where, after all, we spend most of our waking hours.”

—Posted by Alexander Reed Kelly.

Moira Herbst at The Guardian:

In recent decades, the playing field between employers and employees – that is, between capital and labor – has become severely warped. Especially at the lower end of the skills spectrum, workers often face a lack of respect by management, erratic schedules, and punishment for trying to form a union. The vast majority of American workers are “at-will” – meaning, you can be fired for any reason. Perhaps your performance has lagged, or perhaps the boss doesn’t like your new shoes.

If more enterprises were employee-owned, fewer workers would face this daily exploitation. Labor’s share of the national income – now at its lowest point in recorded history – would rise. The ratio of average of CEO pay to worker pay (currently, an astounding 380:1) would shrink. Inequality, which harms society and hampers economic growth, would lessen.

Here’s why. In publicly-traded corporations, the board of directors – nominated by a tiny number of outside investors – decides who runs the show and how profits are distributed. In employee-owned companies, workers themselves are the shareholders. Because stock does not trade publicly, the business is insulated from the pressures of the stock market and its obsession with short-term profit. Instead, the worker-owners can focus on long-term growth, sustainability, and fairness.

Part of that focus is executive pay. The base salary of the CEO of Publix, for example, was about $810,000 last year, far lower than than that of his grocery chain CEO counterparts. Publix isn’t a slave to Wall Street’s tendency to set bloated executive pay packages on expectations that share prices will magically balloon under new leadership.

Another focus is creating and maintaining good jobs for the long haul. While publicly-traded firms slash workers in a downturn, for example, an employee-owned company might choose to cut hours or pay for everyone to avoid layoffs.

Read more

More Below the Ad

New and Improved Comments

If you have trouble leaving a comment, review this help page. Still having problems? Let us know. If you find yourself moderated, take a moment to review our comment policy.