Labor Studies Journal

http://lsj.sagepub.com/ A New Frontier for Labor : Collective Action by Worker Owners

Hoyt N. Wheeler Labor Studies Journal 2008 33: 163 originally published online 11 January 2008 DOI: 10.1177/0160449X07302730 The online version of this article can be found at: http://lsj.sagepub.com/content/33/2/163

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What is This?

A New Frontier for Labor

Collective Action by Worker Owners
Hoyt N. Wheeler
University of South Carolina

Labor Studies Journal Volume 33 Number 2 June 2008 163-178 2008 UALE 10.1177/0160449X07302730 http://lsj.sagepub.com hosted at http://online.sagepub.com

Worker ownership is an old idea that is newly relevant. A crucial reason for ownership that is seldom noted nowadays is its potential to contribute to industrial democracy. Worker ownership is widespread in both the United States and Western Europe. For ownership to translate into influence on corporate governance, workers capital power must be organized collectively. Trade unions can serve this function. In France, Italy, and Germany, unique organizations called worker shareholder associations have come into being with the exercise of workers capital power as their goal. Keywords: unions; workers; shareholders; governance; financial participation; worker shareholder associations; trade unions

weeping across the world relatively unnoticed is an old idea made new again. It is the rather straightforward notion that for success in the modern global economy, the necessary commitment to business success [can] best be achieved when enterprises [are] owned and controlled, not by faraway shareholders or the state, but by the people working in them (Oakeshott 2000:17). But for this phenomenon to realize its potential for giving workers real power in this globalized world, it is necessary to organize worker ownership collectively and turn it into an instrument of influence on corporate governance. Until recently, there has been a lack of organizations that are both willing and able to do this. That is changing, however, with labor organizations becoming more receptive to the notion of aggregating the capital power of workers and with the development of specialized worker owner organizations in Europe. Looking around the globe, we see Korean unions putting together a plan for worker ownership of their firms and Venezuelan president Hugo Chavez making worker cooperatives a central focus of his economic reform program (National Center for Employee Ownership 2006b, 2006d). In Western Europe, financial participation is part of the Social Policy Agenda (2000-2005) of the European Community. In 2005, the leading German political party, the Christian Democratic Union, adopted a policy favoring it. In the United Kingdom and France, legislation

Authors Note: This article was presented to the Study Group on Pay Systems, 14th World Congress, International Industrial Relations Association, Lima, Peru, September 14, 2006. 163
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has recently been adopted encouraging this form of worker participation. In the United States, there has been a gradual but massive accretion of worker ownership in firms through employee stock ownership plans (ESOPs) and 401(k) plans. Broadbased stock option plans have become the norm in American high-technology and biotechnology firms. Worker ownership is an idea that has deep philosophical roots. Ownership of the means of production by workers is fundamental to Marxist theory (Balinky 1970), although in practice, this became state ownership. Also, the non-Marxist, reformist nineteenth-century Knights of Labor in the United States had as one of their bedrock strategies cooperation: the establishment of producer cooperatives. What are the rationales for worker ownership in the modern world? In the United States, Louis Kelso, the father of ESOPs, persuaded a powerful senator, Russell Long, that ownership would lead to a more even distribution of wealth in the country. On this basis, Long had ESOPs included within the Employee Retirement Income Security Act of 1974 (Wheeler 2002). In both the United States and Europe, many managers have come to believe that ownership can increase worker commitment to companies and lead to improvements in productivity and decreases in turnover. In Europe, stock ownership is seen as a mechanism for shoring up pension systems that have current or predicted future deficits (Kluge and Wilke 2006). What is seldom mentioned in the literature is what visionary union leaders such as Lynn Williams of the United Steelworkers of America see as an opportunity for industrial democracy, a fundamental goal of organized labor (Wheeler 2002). It is this last purpose that is most important for American workers and their unions and is of greatest interest to labor scholars. This analysis begins with a discussion of the state of worker share ownership in the United States, which is greater than is commonly believed. The potential for unions to serve as advocates for workers collectively using the power of their capital, as well as their labor, is considerable but hampered by both ideological and practical constraints. The European situation is somewhat similar to that in the United States, with European trade unions only reluctantly supporting financial participation, preferring instead the participation of workers as workers rather than as investors. There is nevertheless a good deal of momentum behind the idea of financial participation in Europe. Most interestingly, in Europe, a set of specialized organizations, worker shareholder associations, have come into existence to aggregate individual workers capital into a powerful collective force. These organizations are especially worthy of notice and study.

The State of Worker Ownership in the United States

Worker ownership is thriving in the United States. A 2006 profile of employee ownership showed 9,225 ESOPs, stock bonus plans, and profit-sharing plans that

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primarily invest in employers stock. These involve 10.1 million workers. These numbers are up from 1,600 plans with 250,000 members in 1975. The value of plan assets is $600 billion (up from $133 billion in 1990). There are 2,200 401(k) plans invested primarily in employers stock, involving 4 million participants, with assets valued at $75 billion. There are 4,000 broad-based stock option plans covering 9 million employees, with a value of several hundred billion dollars. Last, there are 4,000 stock purchase plans covering 12 million workers (National Center for Employee Ownership 2006c). The potential effects of worker ownership on corporate governance depend heavily on the proportion of the stock in a particular company that is held by workers. In 30 percent of the ESOP firms that are privately held, employees own more than 50 percent of the companies stock. Only 1 percent of publicly traded ESOP firms are more than 50 percent employee owned. However, 34 percent of publicly traded companies that have ESOPs are between 11 and 30 percent owned by employees (National Center for Employee Ownership 2006c). In many companies, this would constitute the largest single block of stock. Whether owned through ESOPs, 401(k) plans, stock options, or stock purchase plans, even much smaller percentages of a companys stock can place significant capital power in the hands of employees, if they act collectively as shareholders. Looking at a listing of the 100 largest majority employee owned companies in the United States, one finds that Publix Super Markets, with 136,000 employees, is at the top of the list. The next largest, Hy-Vee, with 46,000 employees, is also a supermarket chain. But the list is quite diverse overall. There are high-tech companies, paper manufacturing companies, drugstores, construction companies, nursing homes, printing firms, restaurants, publishers, waste disposal companies, and auto dealers, to name only a few. A name on the list that is familiar to industrial relations scholars is the Bureau of National Affairs (1,800 employees), which publishes materials in our field (National Center for Employee Ownership 2006a). Also interesting, although somewhat dated, is a 1991 analysis of employee holdings in the 144 Fortune 500 companies that have some degree of employee ownership. The average percentage ownership by employees in this group of Fortune 500 companies was found to be 27.2 percent. Among the highest in employee ownership were McDonnell Douglas (32.60 percent), Grumman (42.85 percent), Wierton Steel (73 percent), Wheeling-Pittsburgh (33 percent) and Avondale (44 percent) (Blasi and Kruse 1991). By far the most intriguing aspect of worker ownership for industrial relations scholars is its potential for worker influence in corporate governance. It is abundantly clear that for all the talk of stakeholders and social responsibility, the main beneficiaries of American corporate performance are the shareholders. This is a core reality of modern managerial capitalism. It has been said that managerial capitalism is based on the traditional idea that managers must be relentless in their pursuit of the interests of shareholders (Osigweh 1994:33). According to Milton Friedman (1962), the only

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social responsibility of a corporation is to make a profit: the bottom line for shareholder interests. There is a considerable body of scholarly opinion that holds that corporations should serve the interests of various stakeholders (Clarkson 1998). However, it appears that it is the realist view, that the law of the corporate jungle is the dominance of shareholder interests, that best describes both the law and the reality (Donaldson 1989). Other stakeholders, such as employees, find that when push comes to shove, it is the shareholders who have the power to demand that their interests take priority over all others. Furthermore, in this globalized world, the power of capital is well nigh supreme, with neither governments nor unions able to deal effectively with it. This being the case, it would seem to be a good idea for workers to have some of this power. As owners, they can have the ability to have their interests served against the resistance of others: power, not mere voice. The chief difficulty for workers in asserting their capital power within their firms is that it is unusual for them to have their small individual holdings aggregated into a voting bloc that takes advantage of their collective power. In addition, firms adopting plans to share ownership with employees do not typically see this as having anything to do with the governance of the firms. They are much more likely to see stock ownership as a token benefit to employees that will, they hope, add to their motivation and commitment to the firms, or as a means of heading off hostile takeover attempts. The logical mechanism for aggregating workers capital power is the same one that aggregates their labor power: their unions. Yet American unions have generally been resistant to worker ownership (McElrath and Rowan 1992). Historically, producer cooperatives were emphatically the road not taken by the AFL unions when they won their competition with the Knights of Labor in the late nineteenth century. According to Commons et al. ([1918] 1966), the deliberately planned policy of the [Knights of Labor] as a whole, was directed chiefly at co-operation (p. 430). Foner (1955), writing labor history from a different perspective, also saw this as a key goal of the Knights of Labor. In the early and middle parts of the nineteenth century, several trade unions formed producer cooperatives (Taft 1964). Although an interest in them continued to some degree,
the failure [of cooperation] was definite and final. Not since this time has the American labour movement ventured upon co-operation. The year 1888 marks the closing of the age of the middle-class panaceas, and consequently the beginning of the wageconscious period. . . . the trade unions . . . eschewed co-operation. (Commons et al. [1918] 1966:438; see also Stern et al. 1983)

Unions have generally been opposed to shifting the risks of an enterprise onto employees. ESOPs are particularly risky as pension investments, because they are invested in the stock of only one firm, thereby lacking the diversification that most experts believe to be necessary for a pension fund. This was illustrated by the fate of the employees of Enron, who lost their pensions when the company failed. Also,

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unions fear a loss of militancy on the part of workers who are also owners. The traditional American bread-and-butter union view is that unions exist to serve as adversaries to represent the interests of labor as opposed to (not in collaboration with) capital (Barbash 1984). Yet there may be a false dichotomy between worker interests and the interests of other kinds of owners. Workers always have a strong interest in the success of firms. Indeed, rank-and-file workers have a greater stake in the long-term survival and prosperity of firms than either members of the more mobile managerial class or shareholders, who may just be looking to make a quick profit in that great gambling parlor called the stock market. So it does make sense that in recent years, a number of American unions have had experience with worker ownership, sometimes unwillingly, but occasionally as a strategic decision. In 1998, a sample of collective bargaining agreements showed 68 percent with 401(k) plans and 11 percent with ESOPs (Bureau of National Affairs 1998). There is strong evidence that unions have made a difference in corporate governance when they have been involved in ESOPs and other worker investment plans. Their main influence on these plans has been the expansion of voting rights for employees (Hester 1988). In one case, the Kaiser Aluminum ESOP, the trustee was required to vote the shares for which he did not receive direction in the same manner as those for which he did receive direction from worker shareholders. Given the typically low rate of employees providing direction, this was an important achievement (Hester 1988). The United Steelworkers of America had considerable experience with workerowned companies in the 1990s, mainly in companies bought by their workers to prevent plant closures and save jobs (United Steelworkers of America n.d.). This led to the formation of their Worker-Ownership Institute (WOI). At one point (1998), the WOI included thirteen companies with 22,000 workers. However, as a number of these companies changed ownership, this group of firms melted to four companies employing 1,200 workers in 1999, and the WOI was deemphasized and folded into the tasks of one union official (R. Davis, vice president for administration, United Steelworkers of America, personal interview, 1999). There have some well-known failures of worker ownership experiments involving unions, including United Airlines, Rath Packing, and Hyatt-Clark. Unfortunately, it is the failures that are best known. They largely took place in troubled industries and firms, examples of what the United Steelworkers of America and others call lemon socialism (Wheeler 2002). There are also examples, such as O&O Supermarkets, Republic Engineered Steel, and several other steel companies, in which firms survived and prospered, at least for a time, under majority worker ownership in the presence of unions (Bureau of National Affairs 1999; Carberry 1996; United Steelworkers of America n.d.; Wheeler 2002). There is ample evidence that unions have been successful in situations in which they represent groups of employee shareholders, particularly with respect to such

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issues as executive compensation, in which they share interests with other shareholders (Schwab and Thomas 1997). One study found that the presence of a union in majority employee owned firms led to more communication to employees, employees being more active in trying shop floor participation techniques, and employees being more interested in decision making. At several firms, union officers had become high executive officers of the firms (Logue and Yates 2001). One of the demands of unions in response to downsizing and worker givebacks has been to be able to appoint directors of firms. The Teamsters, United Steelworkers of America, and other unions have done this, often appointing academics as directors. There is at least anecdotal evidence that this has sometimes served the interests of workers as well as of other shareholders (Kochan 2005). Union pension funds provide a promising avenue of worker and union influence on corporate governance. Ron Blackwell, director of corporate affairs for the AFLCIO, has talked about influencing companies to take the high road in their employment relations (personal interview, 1997). Calpers and other union-governed funds have often been effective activist shareholders. The allure of this strategy is the enormous power in the billions of dollars invested in these funds. One limitation is that the fiduciary obligation of fund managers is to maximize return on investment. Although they may adopt socially responsible strategies, or ones that favor unionized firms, this is permissible only if the financial results are approximately equal to those that would be realized by more traditional investments (Schwab and Thomas 1997). Also, they do not typically act in regard to the companies at which the particular groups of worker pension fund beneficiaries are employed. The legal obligation of fund managers and trustees to serve the financial interests of workers, to the exclusion of their interests as workers, is a piece of the law that needs reform before these fiduciaries can represent the entire set of interests of the persons whom they represent (Wheeler 2002).

The State of Worker Ownership in Europe

The European Commissions Social Policy Agenda (2000-2005) proposes that a communication and action plan be worked out on worker financial participation. It calls on member states to move toward this form of participation. Since 2000, France has passed a law that makes financial participation more readily available to employees in small and medium-sized enterprises, the United Kingdom has adopted two new share plans, and Germany has changed its company law to encourage the use of stock options (Poutsma 2006). A study conducted between 1999 and 2004 by the European Foundation for the Improvement of Living and Working Conditions found that, in contrast to the situation in 1996, when a report on this subject (the Pepper II Report) was made to the European Commission, there had developed active engagement with financial participation

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across Europe. According to this study, financial participation had become increasingly common among large European companies. Profit sharing was the prevalent form, but this varied across countries. Broad share ownership plans had become common in countries where there existed savings plan structures to support them. Worker ownership plans had been triggered by legislation and tax breaks. However, small and medium-sized enterprises were confronted with significant difficulties in adopting such plans because of the high costs and the administrative workload involved. The study also found that companies that had employee share ownership programs in place tended to communicate better with employees than firms not having such programs. The study found that evidence indicates that financial participation can deliver real benefits for employees, enterprises and national economies but that it was underused in most European countries (European Foundation for the Improvement of Living and Working Conditions 2005:1). A recent survey of 151 firms in France, Germany, Spain, the Netherlands, Finland, and the United Kingdom that could be identified by the researchers as having some form of participation (representative participation and teamwork, as well as financial) found that 32 percent had share acquisition plans for all or most employees. Thirty-seven percent had profit sharing for all or most employees. Stock options tended to be limited to managerial employees. There was considerable variation across countries. Share acquisition plans other than stock options were quite common in Germany (40 percent), France (54 percent), and the United Kingdom (91 percent). They were relatively rare in Spain (16 percent), the Netherlands (14 percent), and Finland (12 percent). With respect to profit sharing, these plans were most common in France (52 percent), Finland (52 percent), and the Netherlands (45 percent). Employees generally held less than 5 percent of the stock in their companies, with a median holding of 1 percent (Poutsma 2006). The majority employee owned European companies that have the largest numbers of employees are in a wide range of industries. At the head of this list, and in many ways the prototype for such organizations, is Mondragon (70,884 employees). It includes a variety of industries and is primarily located in the Basque region of Spain. It is followed by the British John Lewis Partnership (63,000 employees) which has a chain of department stores and supermarkets. The next four (20,000, 17,000, 12,500, and 11,000 employees) are Italian firms. Three are involved in building and civil engineering, and one is in facilities management. Cooperatives make up by far the greatest proportion of these large majority employee owned European firms. Their businesses include catering, cleaning services, retail stores, ceramics, taxis, the press (the French newspaper Le Monde), paper manufacturing, energy, Christmas ornaments, surgical blade manufacturing, ambulances, cookware manufacturing, and textiles (European Federation of Employee Share Ownership 2006a). Some of the more interesting conclusions of Poutsmas (2006) study were that (1) there was a general taking up of the Anglo-Saxon idea of shareholder supremacy, in which shareholding is valued and seen as related to corporate governance;

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(2) profit-sharing plans and share-related plans were very broadly based in those firms having them, with participation rates of 80 percent of employees in profit sharing and 60 to 65 percent in share plans; (3) the main objectives were worker motivation and showing employees that they were valued; (4) the main obstacles were restrictive and complicated legal frameworks and insufficient tax breaks; (5) plans were initiated by employers, but trade unions or other employee representatives were involved in setting them up; and (6) it was the more participative companies that established broadly based share plans. European trade unions have never been particularly enthusiastic about financial participation. Although seeing it as a possible financial benefit to employees, like American unions, they are concerned that it might substitute for wages and shift the risk of enterprises onto the shoulders of their employees. A company that failed would cost its workers both their jobs and their savings. In addition, European unions appear to have a strong preference for workers participation as workers rather than as investors. The widespread presence of works councils and worker or union membership on corporate boards is seen by them as real participation (European Trade Union Confederation n.d.). Three European countries are of special interest because of their adoption of a unique mechanism for worker shareholder representation, discussed below. These countries are France, Italy, and Germany.

France
The French have a long history of government policies encouraging workers financial participation. The DeGaulle government passed the first law on the subject in 1967. Since then, more than ten laws have been adopted regarding financial participation. France has mandatory profit sharing (Poutsma 2006). The original system required employers to take amounts from their profits each year and distribute them to their employees (P. Risselin, Ministere de lEmploi et de la Solidarit, personal interview, June 11, 2002). As noted above, 52 percent of the French firms in Poutsmas (2006) survey had share ownership plans for most or all of their employees, and the same percentage had profit sharing. In 2002, 2 percent was the average percentage of shares of companies held by worker shareholders (H. Alline, president, Rhodia Alliance, personal interview, May 20, 2002). By 2006, this had risen to 6.88 percent or, eliminating two outliers (SAFRAN at 19.1 percent and Cegos at 65 percent), 3.95 percent (Fdration Franaise des Associations dActionnaires Salaries et Anciens Salaries 2006). French companies now have a choice of creating for their employees either savings plans or common funds. The funds can own shares of the companies themselves or of other firms. Under a 2001 law, there is an oversight committee for such funds that is generally composed of at least 50 percent worker representatives (P. Risselin, personal interview, June 11, 2002). The 2001 law provides that when worker ownership reaches

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3 percent of the stock of a company, the conseil dadministration, which is a level below the board of directors, must have at least one member representing the workers (J. Conan, national delegate, Confdration Franaise de lEncadrement CGC, personal interview, May 16, 2002).

Italy
For many years, Italian worker ownership was almost exclusively in the form of producer cooperatives. However, in 1992, the Italian government adopted a new policy of privatizing state-owned banks and industries. Much of the stock in these newly privatized firms ended up in the hands of their employees. In major banks that were privatized, 3 percent of the stock was offered to employees. Over time, employees came to hold the largest single block of stock in these banks. By 2002, in ENI, the former state-owned gas company, 59 percent of the employees held stock. Also in 2002, there were up to twenty companies in which employee shareholdings were significant (G. Di Re, Gianni, Origoni, Grippo & Partners, Avvocato, personal interview, June 4, 2002).

Germany
Germanys history of interest in worker financial participation goes back to the Krupp Company issuing preferred shares to workers in 1921, although this scheme collapsed in 1924. After World War II, workers participation in the form of works councils and membership on corporate supervisory boards came about. Beginning in 1960, a series of laws (the Act Promoting Capital Formation by Employees, as amended) were enacted to support capital accumulation by workers, initially for the purpose of changing the distribution of wealth in the society. These programs were very modest in terms of the amount of wages that could receive favorable tax treatment by being invested by workers. Later attempts at worker financial participation, beginning in the 1970s, were driven by managements pursuing practical firm-oriented aims, such as the encouragement of employee motivation (Senne 2002). The most recent legislation was adopted in 1998, providing for an increase of the amount per year subject to preferential tax treatment from DM 936 ($532) to DM 1,736 ($987). In 1998, 11 percent of blue-collar working households in western Germany and 18 percent of the households of salaried employees owned shares. In eastern Germany, these numbers were 3 percent and 6 percent, respectively. (European Foundation for the Improvement of Living and Working Conditions 1998). However, by 1999, 2.3 million German employees were shareholders in their 2,700 firms, with investments of DM 25,000 million ($13,615 million) (Senne 2002). German trade unions gradually came to see financial participation as simply another financial benefit rather than as a road to industrial democracy (Senne 2002). However, one often hears from German trade unionists the argument that this particular financial

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benefit places workers doubly at risk, because both their jobs and their savings will be destroyed if a firm fails (Vogel 2006). German unions, particularly IG Metall, have vigorously opposed any part of worker compensation varying with the success or failure of the employer. There was, however, a significant break in this policy by IG Metall in 2006, when the union agreed to a small (approximately 350 to 650) one-time payment to be made to employees at the discretion of employers, on the basis of the profitability of the firms. One basis for German trade unions coolness toward financial participation is that they already have participation through membership on corporate supervisory boards and works councils under their codetermination system. This gives them participation as workers. As one German trade unionist said, Workers have a lot of influence on German enterprises. They have the possibility to speak to representatives of owners in the board. Therefore there are not the problems faced by American unions (H. Tofaute, DGB, personal interview, 2002). A potentially important area of worker financial participation in Germany is that of employees loaning funds to their employers. This places workers in the status of creditors rather than shareholders. Many large German companies, unlike similar American firms, are privately held. They are reluctant to distribute stock more widely, leading them to be resistant to issuing stock to employees. However, workers could nevertheless have a significant influence on corporate governance as creditors. There does exist legislation providing for and regulating employees loans to their employers (Senne 2002). There is one crucial condition for all of this worker ownership to be a basis for worker influence on corporate policies. It is for worker power to be aggregated and used as a single bloc. Individually, workers have only, as the old union organizing song says, the feeble strength of one. But used collectively, a bloc of modest proportions might well own the single largest block of stock in a large corporation. The obvious candidate for an organization to do this is a workers union. But there is another possibility that is being pursued very actively in France, Italy, and at one major firm in Germany. This is the worker shareholder association.

Worker Shareholder Associations

While conducting a study of worker ownership in Europe in 2002, I discovered a phenomenon of which I had not been aware: worker shareholder associations. These are unique organizations. They consist of workers who are also shareholders and act on their behalf to forward their interests in this special role. As trade unions represent workers in their role as workers, these associations represent them in their role as worker-owners. Whereas unions aggregate the labor power of workers, worker shareholder associations aggregate their capital power. Unions are no doubt capable of fulfilling this same function, but, as noted above, they have been reluctant to do

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so. A report of the Trade Union Advisory Council to the Organisation for Economic Co-operation and Development says,
Where ESOPs are established, the corporate governance framework should facilitate the collective organization of employee shareholdersin the form of employee shareholder associationsin a way that ensures independence from executive management. Such collective ownership, once a certain amount of capital has been reached, should result in independent representation on the board of directors. (Jones and Habbard 2005:24-25)

Worker shareholder associations are headquartered in France, Italy, and Germany. These associations are most widespread in France. In Italy, a number of these associations developed very rapidly in the 1990s, in the wake of a wave of privatizations. In Germany, only one association was actively functioning in 2006, an association of Siemens shareholders. It should be noted that a number of the French firms operate internationally, leading many of the French worker shareholder associations to have branches in other countries.

France
It is in France that worker shareholder associations have reached the greatest degree of development. The first of these associations was founded in 1986 at Elf Aquitaine. The federation of worker shareholder associations, Fdration Franaise des Associations dActionnaires Salaries et Anciens Salaries, was born in 1993. There are now twenty-six worker shareholder associations that belong to this federation. They include associations in such firms as Air France, Arcelor, Credit Lyonnais, France Telecom, Renault, Rhodia, Total, and Thales. There are 905,214 members of the twenty-six worker shareholder associations (Fdration Franaise des Associations dActionnaires Salaries et Anciens Salaries 2006). An example of a French association is the Rhodia Alliance, which is the association of worker shareholders of Rhodia, a large multinational chemical company. It was founded in 2000. The Alliance has 12,800 members in France, Germany, England, and Brazil (Fdration Franaise des Associations dActionnaires Salaries et Anciens Salaries 2006). At the outset, the associations officers requested financial support from the company. When the Alliances officers offered to engage in the financial education of workers, provide a channel of communication to them, and represent Rhodia in certain external matters, the companys president agreed to fund the organization. One of the principal functions served by the Alliance is to provide a credible explanation to workers about the financial position of the company and the variations in the price of its stock. According to one of the officers, the Alliance was able to block a takeover bid by a Dutch company by communicating to management that it would oppose the bid (H. Alline, personal interview, May 20, 2002). At present, workers own approximately 3.5 percent of the stock (H. Alline, personal interview, June 30, 2006).

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Italy
As workers gained ownership of shares in privatized banks and industries beginning in 1992, they began to organize worker shareholder associations. By 1999, there were thirteen such associations (G. Di Re, personal interview, June 4, 2002). In 1999, the worker shareholder associations formed a national organization, Federazione Italiana delle Associazioni dei Dipendenti Azionisti (FIADA). FIADA performs the function of lobbying the national legislative body on behalf of worker owners. Because Italian corporate law gives minority shareholders very few rights, FIADA is engaged in actively lobbying for changes in national corporate law that would be more favorable to minority shareholder influence in general. In addition, it is working toward legislation that would be more favorable to worker owners in particular (G. Di Re, personal interview, June 4, 2002). FIADA participated in hearings on worker ownership held by the Financial Committee of the Italian Chamber of Deputies in 2000 and again in 2002. In addition to its political action, it has a scientific side. In 2002, FIADA sponsored two professors who were writing books on financial participation (G. Di Re, personal interview, June 4, 2002). The worker shareholder association at the Bank of Milan is one of the most important. Seven thousand worker shareholders hold 10 percent of the stock in this major bank. On the basis of this degree of shareholding, the worker shareholder association is involved in selecting members of the board of directors of the bank. Although it appears on the surface that the worker shareholder association and Federazione Autonoma Bancari Italiani (FABI), the union of bank employees, are separate organizations, in fact they are one. It is the worker shareholder association, not FABI, that participates in the selection of directors, but seven of the sixteen members of the board are representatives of the union (F. Garberi, provincial secretary, FABI, personal interview, June 4, 2002).

Germany
Verein von Belegschaftsaktionren in der Siemens AG, the lone active German worker shareholder association, was founded in 1994. This association of Siemens employees has only 150 members, but approximately 3,000 workers regularly give the association the right to vote their shares in stockholder meetings. According to its chairman, Manfred Meiler, a group of workers formed the association because the bank that held their shares at the time always supported whatever management wanted (M. Meiler, chair, and W. Niemann, vice chair, Verein von Belegschaftsaktionren in der Siemens AG, personal interview, July 14, 2006). About 50 percent of Siemens employees hold shares. This amounts to about 12 to 14 percent of the stock. However, the shares voted by the association amount to only about 0.1 percent of the stock. As a consequence, the powers of the association

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are mainly publicity and persuasion. However, the association is sometimes able to work with members of the Siemens family, who hold about 10 percent of the stock. Together, they can be quite influential. In 1999, together with the family, the association successfully opposed a hostile takeover by Vodaphone (M. Meiler and W. Niemann, personal interview, July 14, 2006). The association lets the public media know when it opposes a corporate policy. Because Siemens is very conscious of its public image, this can have powerful effects. The association also communicates its positions to the companys president, contending that it accurately reflects the views of the workers. In 2001, the association made a proposal for wealth formation, arguing that workers should have a greater share of the wealth of the company. This would be through the issuance of stock to employees at no cost to them. This is consistent with the current policy position of the most influential political party in the German grand coalition, the Christian Democratic Union, which would like to see worker financial participation serve as a source of supplemental pension income for workers (M. Meiler and W. Niemann, personal interview, July 14, 2006).

Europe
At the European level, worker shareholder organizations, along with others with similar interests, are organized into the European Federation of Employee Share Ownership. The purpose of this federation is to be a European umbrella organization for those persons and groups interested in employee ownership. It organizes meetings and events, lobbies, provides training and advice, and generally promotes worker ownership in Europe. Its board of directors includes members from Belgium, Italy, Ireland, the United Kingdom, Poland, the Netherlands, Denmark, Hungary, Slovenia, and Spain (European Federation of Employee Share Ownership 2006b).

Conclusions
Worker ownership may be an idea whose time has come. Not only do we see its widespread adoption around the globe, but we also see the development of at least one mechanism, worker shareholder associations, through which it can have an effective influence on corporate governance. Worker shareholder associations as they exist in France, Italy, and Germany appear to be capable of looking out for worker shareholder interests. In other countries, trade unions could certainly take up this task if they were so inclined. Unions in the United States and some other countries have adopted a strategy of using the power of worker pension funds to influence corporate policies. They have used the positive mechanism of economically targeted investing to place union funds at the disposal of employee-friendly companies. They have also used socially

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responsible investing to deny union-controlled capital to companies that fail to meet international standards on worker rights and the environment. These are useful in a general sense, but they have little or no impact on the particular companies for whom their members work. A strategy of organizing worker shareholders and representing workers capital interests along with their labor interests could save jobs and encourage corporate policies that serve the long-term interests of both workers and those other shareholders with patient capital who are invested for the long haul. As I have argued at length elsewhere (Wheeler 2002), employee ownership is a highly promising strategy for worker power that has considerable potential for restoring the balance of power between workers and other corporate stakeholders. By placing in the hands of workers the instrument of capital, they can be truly empowered: not having mere voice but rather the ability to achieve their goals, even when these conflict with those of other powerful players in the world of global capitalism. American unions are badly in need of new strategies. This is one that might actually work. There are many uses to which a strategy of worker ownership can be put. For example, the very difficult problem for unions of how to organize contented workers the winners in the new global economycould be approached by taking the position that the company is a good company, so good that the workers should own at least a share in it. Also, because it does give workers an objective and visible interest in the success of their firms, they and their unions might be more likely to be perceived by managers and the public as a positive force rather than an impediment to competitiveness. Having an influence on corporate policy could be useful for drawing support from other progressive groups, such as environmentalists. One of the activities of the workers shareholder associations that could be copied is the financial education of workers. Knowledge is power. This is especially true of financial knowledge. American unions could, as have those in France and Italy, encourage and support the establishment of worker shareholder associations. Following this model, the unions would not have any formal ties with the associations. Nevertheless, union members could have de facto control of the associations by occupying the principal association offices. Furthermore, these associations could be seen as part of the American labor movement, broadly defined (see Wheeler 2002). The dream of the old Knights of Labor of the nineteenth century might actually be realized in the twenty-first century. Those who produce the goods and services of the economy might receive the just fruits of their labor through their power as owners as well as through their power as workers.

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Hoyt N. Wheeler is a professor of management and Moore Fellow in the Moore School of Business, University of South Carolina. He was German Fulbright Distinguished Chair at the University of Frankfurt am Main for 2005-2006. He holds the degrees of JD, University of Virginia, and PhD in industrial relations, University of Wisconsin. His research interests include labor unions, worker ownership, workplace justice, labor and employment law, and international and comparative industrial relations. His most recent books are The Future of the American Labor Movement (Cambridge University Press, 2002) and Workplace Justice Without Unions (W. E. Upjohn Institute for Employment Research, 2004). He is an active labor arbitrator and a member of the National Academy of Arbitrators.

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