Is Employee Ownership Coming Back?

FLORENCE: Faced with an embarrassing strike by Air France pilots during the World Cup, the French government purchased labor peace by, among other things, offering striking pilots a big ownership stake in their company. Such employee ownership, uncritically lumped together with socialist nostrums over the years, was once widely dismissed as a nutty, ideological illusion. Recently, it has attracted fresh and widespread interest not only as a means to secure more tranquil labor relations, but as a practical means of business organization. In the West, this interest derives in part from declining faith in traditional trade unionism; in the postcommunist East it was stimulated by the speedy collapse of state socialism.

Today, reformers on the left hope that employee ownership will succeed where unionism and government ownership failed in equalizing power and wealth, and in decreasing worker alienation and exploitation. Reformers on the right hope that employee ownership will improve productivity and increase worker identification with the interests of capital.

In many countries, these hopes are stimulating public policy. In the United States employee ownership has been promoted by large tax subsidies and by exceptional provisions in pension laws. In Russia, employees have been awarded majority stakes in newly privatized state enterprise. And in Germany, mandatory worker representation on the board of directors, together with substantial job security, effectively gives employees many of the attributes of owners.

Employee-owned firms have, in fact, always been common. The partnerships of professionals that have long dominated services such as law, accounting, and -- until recently -- investment banking are familiar examples. Nor are they trivial: the largest U.S. accounting firms do business on an international scale and have long had thousands of partners. Transportation is another field where employee ownership is common: around the world, trucking companies, bus companies, and taxi companies are often organized as cooperatives owned by their drivers. There are also important examples in other industries, including plywood manufacturing in America, appliance manufacturing in Spain, and construction in Italy.