United Airlines ESOP
A case for workers' control
By Milt
Neidenberg
Workers' control of an industry or corporation facing
protracted crisis is an option that has been too long ignored
in the United States and abroad. Following World War II,
workers in West Germany, Belgium, France and, in particular,
Sweden, instituted workers' control.
If the workers have no socialist perspective and the
capitalist system remains in place, workers' control can
eventually falter and management sooner or later will regain
control. Nevertheless, the struggle for workers' control is far
superior to just allowing waves of plant closings, corporate
bankruptcies, mass layoffs and the general anti-labor assault
resulting from the restructuring of a major corporation or an
entire industry to go unchallenged.
When a modern industrial corporation has been destroyed by
its institutional bankers/shareholders, it is possible for them
and the managers to be thrown out and the industry put under
the workers' control.
The Bridgestone/Firestone tire scandal and the crisis in the
tire industry are classic examples of such an anti-labor
assault. Firestone has announced a second round of layoffs and
plant closings that will affect 1,100 workers for at least five
months. And as it shuts down the plants, the company plans to
furlough thousands more workers.
It should be unacceptable for Firestone management to go
unchallenged in its decision to close plants and lay off
thousands of workers. To date, however, the Steelworkers union
leadership--which represents the unionized rubber workers--has
cooperated with management.
Corporate strategy:
make workers pay
"Make the workers pay" is the strategy of Corporate America
and the Wall Street bankers when a major crisis confronts them
due to their obscene drive to increase profits and intensify
the exploitation of the workers.
Over the years, through boom and bust cycles, the ruling
class has developed many schemes to reinforce its main
objectives: preserving the private ownership of the factories
and control over the workers.
One cruel hoax perpetrated with the financial assistance of
commercial and investment bankers, along with the government,
is the establishment of Employee Stock Ownership Plans,
commonly known as ESOPs.
The pattern begins with a company that has a cash-flow
problem. It is heavily in debt due to limitless salaries,
enormous bonuses and stock options for top executives and wild
speculation in the markets.
Management desperately needs to borrow more money from the
banks. Earnings are down and they can't afford to pay
exorbitant interest rates.
The banks encourage the company to start an ESOP. Since the
company is near bankruptcy, the bankers must be guaranteed that
the workers will contribute their savings and other resources
to the ESOP. A loan is made to the ESOP and the workers turn it
over to the company in exchange for stock. The banks receive
huge tax relief and other benefits, thanks to government
legislation.
ESOPs are not new. They originated in the 1920s, then
collapsed during the great October 1929 stock market crash. The
capitalist crash was fueled to a large extent by a combination
of wild stock market speculation and investments and a crisis
of highly-leveraged corporate and government debt--all rooted
in the crisis of capitalist overproduction.
The crash led to waves of plant closings, bankruptcies,
massive unemployment and unprecedented poverty and misery.
After a few years of catastrophic economic collapse, the
response from workers--particularly the unorganized industrial
workers--was to occupy the plants. They organized sit-down
strikes and other forms of militant struggle. ESOPs disappeared
during this wave of revolutionary activities.
ESOPs returned in the 1970s and grew throughout the period
of capitalist economic restructuring of the 1980s-1990s.
ESOPs are a win-win situation for everyone except the
workers. The banks get more money. The company gets major
concessions from the workers, who are threatened with layoffs
and cutbacks if they don't go along. Included in this trickery
is the illusion that a stock ownership plan gives the workers
influence in corporate decisions.
United Airlines:
A basis for workers' control
However, there is one ESOP that holds the potential to turn
this deception into a struggle for workers' control. It
deserves the attention of the unions involved and the entire
labor movement.
This is the stock ownership agreement between United
Airlines, the 10,000 pilots represented by the Air Line Pilots
Association, and the 49,000 mechanics and other airline workers
represented by the Machinists union. It's the largest ESOP in
the world.
In 1994, workers were given a whopping 55-percent stock
ownership in United Airlines, the world's largest carrier, in
exchange for big wage cuts and work-rule concessions. The
pilots and mechanics saw the ESOP as the only way to save their
jobs.
If you add up the value of the labor power that makes United
Airlines run and other assets, such as pensions and deferred
wages and benefits, it's clear that ownership really belongs to
the workers. Most important, they have the experience and
know-how to run the company. Herein lies the basis for a major
struggle for workers' control.
United management would challenge this with all its power.
The company would claim that stock received by the unions in
exchange for major concessions isn't ordinary stock. It can't
be bought or sold. It can be redeemed at market value only when
an employee retires or quits. And it's not voting stock,
although each union has one member on the board of
directors.
While this is true on paper, the 60,000 Pilots and
Machinists can be powerful enforcers of their ownership rights.
They can challenge the legitimacy of the few bankers and
corporate managers who have sucked the equity out of the
company, imposed intolerable anti-union policies and endangered
airline passengers by putting profits before safety.
Who makes the decisions?
Over the last six years, United forced the unions into a
protracted crisis, demanding more give-backs even as the
airline experienced a 16-fold increase in net income since the
ESOP was formed.
Now United has agreed to buy out US Airways for $11.6
billion and assume $7.3 billion in debt--a move with serious
repercussions for the workers, who had no say.
Now the struggle is heating up, and the issue is: Who should
make the decisions on operations and control?
Currently 49,000 Machinists members are still waiting for a
new contract with United. The last one expired in July
1999.
The Machinists' rank and file are fighting back. The workers
are resisting mandatory overtime, threatened suspensions and
other penalties. They want to spend more time on maintenance
and ground planes that don't meet safety standards.
There are many other issues of contention with management,
such as the union's struggle to get back the huge wage and
benefit concessions it made in 1994.
Although the Pilots recently reached a contract settlement,
there is great sympathy among them for the Machinists'
struggle.
United has issued widespread anti-union ultimatums to avoid
flight cancellations during the holidays. The company went into
a federal court in late November and got a judge to issue a
temporary restraining order against the nominal
worker-owners.
The company then ordered mandatory overtime and a speedup in
plane maintenance and inspection to avoid flight cancellations.
The issue is profits over safety, the flying public be
damned.
Workers' control superior
to ESOPs
The experience of this ESOP shows the potential struggle for
power over who should control United and run its operations.
It's a struggle that calls for the mobilization of the
60,000-member unionized workforce, including pilots, mechanics,
baggage handlers, customer service agents and others.
In his book "High Tech, Low Pay," Workers World Party
Chairperson Sam Marcy stated, "Unlike ESOPs, [workers' control]
does NOT put financial control in the hands of a bogus group of
management-appointed or bank-controlled supervisors who in
effect make decisions without any vote of the workers."
Marcy said: "Workers' control is not a permanent or stable
form of struggle, given the nature of the capitalist system.
However, it is superior to the ESOPs as a transitional form in
the overall class struggle against the bosses... it makes all
decisions regarding operations and control only in consultation
with and by consent of the workers."
Workers at United can resist management's authority to
define the limits of their ESOP. They can put on the
negotiating table the issue of their right to control and
operate the company.
This must be coupled with a well-planned, militant campaign
organized in the spirit of the historic sit-down strikes and
occupations of the 1930s that raised the level of the struggle
and challenged the property rights of the corporate/financial
institutions.
This article is copyright under a Creative
Commons License.
Workers World, 55 W. 17 St., NY, NY 10011
Email: ww@workers.org
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