Inštitut za ekonomsko demokracijo


What about the Union in a Majority Employee-Owned Company?

By David Ellerman


The role of an existing union will depend on whether the employee-owners have majority ownership of the company or only a minority interest. If they are only minority owners, then the union has a more or less traditional role for representing the employees in collective bargaining about wages, benefits, working conditions, and perhaps increase the share of employee ownership in the company. It is only in the majority employee-owned company that the union will have a significantly different role.

The ultimate goal of a union is to help employees get better control over their economic lives. In a company owned all or mostly by outsiders, the union uses collective bargaining as the best means to that end of helping employees control their economic lives. But in a majority employee-owned company through a Coop-ESOP, the employees can gain more control directly through their governance role on the Supervisory Board. There is no need to “collectively bargain” with the company; the employees elect (a majority of) the Supervisory Board. There is no need for the majority employee-owned company to have a legally-binding contract with itself.

A majority employee-owned company is a workplace democracy; the employees are jointly self-governing in their work. But the past experience in East Europe has shown that a one-party democracy is no democracy at all. The union could play the role of the “legitimate opposition” that provides the independent voice, the second opinion, the reasoned alternative that is needed for a workplace democracy not to degenerate into an oligarchy tightly controlled by a small group. If the union provides an independent point of view, the management will not assume that everything it says will be automatically accepted without some scrutiny.

In its role as the independent voice within the company, the union should not confine itself to the “traditional” concerns of wages, benefits, and working conditions. The employees are the majority owners of the company so they have     all the usual concerns of owners such as:

  • business strategy,
  • investment decisions,
  • expansion or contraction of the company,
  • marketing,
  • new product lines, and
  • improving the members’ net income (wages + profits).

The union should take some care, when necessary, to provide intelligent analysis  on all these questions, perhaps with the help of some outside consultants. As long as the management knows that the independent voice (union) is looking over its shoulder, it will be extra careful to make the right decisions in the first place and to fully communicate the reasons for the decisions to all the employee-owners.

The employees should not slip into the view that only the union represents them,  and that the management represents someone else or only themselves. The management is the “government in power” which represents the shareholders, and the union is playing the role of the independent voice and analysis. The union as an organization cannot, of course, become the management, but individuals currently in a union office could take on a management office in the future.

Another important role of the union is to assist the workers in the grievance procedure. When anyone feels they have been unfairly treated, they have the right to file a protest or grievance. But many employees would be intimidated if   they had to “stand up” to the managers all by themselves. Hence the union must provide knowledgeable advocates who will shepherd the protesting employee through the grievance process. And if the union plays this role, then the union should not be represented on the management board that chooses the management.

How do employees keep in touch with what is going on in the company other than through conversations with other employees? The company could have a newsletter that could be issued on at least a monthly basis. The newsletter should not be just a tool for management to communicate with the employees. The    editor should be obliged to provide regular space to the ESOP Committee and the union in addition to the management to express their views. Employees can write letters (published anonymously) to the paper which directly ask intelligent questions to management. Management should be obliged to answer the questions, or it will seem unable to defend its policies.

In addition, the newspaper will periodically have informational supplements on the ESOP, accounting, finance, company law, and other topics that employee-owners need to know about.

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