Can Unions Survive? by Craver Charles B

Author:Craver, Charles B.
Language: eng
Format: epub
Publisher: New York University Press
Published: 1993-12-15T00:00:00+00:00

Obtaining Corporate Control

In 1847, following an unsuccessful work stoppage, twenty members of a Cincinnati iron molders union established one of the first industrial cooperatives in the United States.166 Since that early experiment with worker ownership, other groups of employees have decided that it is preferable to work for establishments that are owned and operated by the people who perform the requisite production or service tasks than for traditional employers. During the 1920s and 1930s, cooperatives were created in Oregon and Washington by plywood workers, and many of those enterprises still flourish today.167 Similar ventures have been launched by the Vermont Asbestos Group,168 the Saratoga Knitting Mill,169 South Bend Lathe,170 Rath Packing,171 and the Chicago and North Western Railway.172

Although the primary motivation for early industrial cooperatives was the desire of individuals to work for themselves, other factors have provided the impetus for more recent employee ownership developments. Corporations facing financial difficulties have begun to recognize that their own labor forces can provide crucial sources of operating capital. Workers threatened with layoffs and plant closures have realized that partial or total employee buyouts of the affected facilities are the optimal means of guaranteeing continued job security. Through the use of employee stock ownership plans (ESOPs), Chrysler,173 Pan American World Airlines,174 Acme Markets,175 Wierton Steel,176 Western Airlines,177 and various over-the-road trucking concerns,178 for example, have generated the funds necessary to remain in operation while simultaneously extending limited entrepreneurial control to their respective employees.

In 1974, Congress concluded that specific legislation was needed to regulate the establishment and operations of ESOPs. Section 407(d)(6) of ERISA179 articulates the basic rules regarding such plans. Congress realized that the Section 404(a)(1)(B) prudent investment requirement180 and the Section 404(a)(1)(C) diversified portfolio mandate of ERISA would substantially impede ESOP development.181 As a result, Congress designed Section 404(a)(2)182 to expressly exempt investments in ESOPs from the prudent fiduciary and diversification requirements of ERISA.183 The enactment of this provision and the tax benefits associated with the creation and financing of ESOPs have provided the impetus for the establishment of greater numbers of worker stock ownership programs.

ESOPs may encounter legal impediments under labor statutes. The Labor Board has recognized that the decision to create an ESOP constitutes a mandatory subject for collective bargaining under the NLRA.184 Employers and representative labor organizations are thus obliged to negotiate the creation of such programs. Once parties agree to establish some form of worker ownership, however, other NLRA issues are raised. Should individuals who own part of their employer be entitled to the rights of “employees,” and be included in bargaining units with employees who are not stockholders? The NLRB has appropriately resolved the first inquiry by determining that shareholder-workers are to be regarded as protected “employees” under the NLRA, except in those unusual situations in which their ownership interests are so substantial that it gives them an “effective voice” in the formulation of corporate policy.185 The Labor Board has also acknowledged the propriety of including stockholder-employees and nonstockholder-employees in the same bargaining unit, so long as no preferential treatment is accorded the stockholder-employees because of their shareholder status.

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