Make 'em all capitalists and end class struggle

December 05, 1996|By George F. Will

CHICAGO -- A union leader, explaining the theory and practice of employee ownership at the world's largest airline, says the practice is complicated but the theory is simple: ''No one washes a rental car.'' He means, you take care of what you own.

That is looking on the bright side, which developments so far justify. However, the 60,000 of United Airlines' 84,000 employees (flight attendants declined to join) who bought 55 percent of the company, and acquired three of the 12 seats on the board of directors, did so because of a grim fact, not a theory. They bought reluctantly, with funds they pooled by taking pay cuts. Management had convinced them that the alternative was severe layoffs.

When survival was at stake

United's chairman, Gerald Greenwald, had helped lead Chrysler back from the brink by pruning 60,000 workers, and he had no appetite for repeating such carnage. At Chrysler, Mr. Greenwald saw, ''It took about two seconds to get everyone working together when survival was at stake.''

And consider this: Combining all expenses and revenues from the birth of the U.S. airline industry to the present, the industry is in the red. All profits made by all U.S. airlines prior to 1990 amounted to less than the $13 billion the industry lost in the first five years of this decade.

Mr. Greenwald stressed to United's employees the pertinence of an ancient political axiom: ''Join the side you're on.''

Employee ownership was a strategy for improving the corporate culture, and therefore productivity and profits, by, in Mr. Greenwald's words, tying ''our employees closely to the company by forging an economic link between their interests and United's interests.''

The results? United has gained market share. Employees who took pay cuts averaging 15 percent in order to become stockholders -- and avid readers of newspaper financial pages -- have seen United's stock more than double. Sick time and workers' compensation claims declined 17 percent last year. Operating revenue per worker has risen faster than at American and Delta, even though United has hired an additional 7,000 people since employees became owners.

This is corporate America's largest experiment with an ESOP -- employee stock ownership plan, an idea championed by one of the brighter senators of modern times, the son of the man who proclaimed ''Every Man a King.'' Former Louisiana Sen. Russell Long, Huey's son, had a less extravagant aspiration: Every worker a shareholder.

Proletarian plutocrats

He used his chairmanship of the Finance Committee to write encouraging laws. So now employees -- technically, the proletariat -- play a significant part in running a company that borrows billions to run itself.

The class struggle isn't what it used to be, but neither has it been banished from the human story. Still, the stockholding employees have made a no-strike guarantee through the year 2000, relying on arbitration as an escape valve for tensions.

In many industries the strike weapon has become almost too dangerous to wield in a world of intense competition. Major League Baseball can tell you that the customers are not waiting patiently in the usual numbers when the strike ends. And employees seeking sizable increases in compensation are aware that such increases can cause a drop in the value of part of their compensation -- United stock.

Reversed incentives

Although unions usually want to increase the number of a company's employees in order to increase the number of dues-paying members, United's pilots' and mechanics' unions now have an incentive to minimize new hirings, and even have encouraged the hiring of nonunion temporary workers. Each union owns a fixed number of shares. Each additional employee means the others have a smaller portion of the stock supply.

Furthermore, because each share is worth more if United's productivity and profits grow, workers are less resistant to cost-cutting measures. Thus 60,000 owner-workers are motivated as profit-maximizers.

Is United's version of employee ownership, as one union official believes, ''a paradigm for post-industrial America?'' Perhaps this sort of broadening of capital ownership within a corporation can have an effect comparable to, if not of the magnitude of, the provision in the tax code that makes mortgage interest deductible from taxable income.

That provision helped produce a nation with a propertied middle class, and hence a conservative temperament. Because of its scale, United's attempt to blur the lines between, and merge the interests of, capital and labor is writing a promising new chapter in the history of capitalism. And if such employee-ownership programs produce work forces permeated by capitalist thinking -- job security and maximized profits achieved through increased productivity -- then these programs will diminish some of the forms of social strife that have fueled modern liberalism.

George F. Will is a syndicated columnist.

Pub Date: 12/05/96

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