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Lessons Learned From United's Employee
Stock Ownership Plan

 
December 9, 2002 - The following is a statement by J. Michael Keeling, President, The ESOP Association, in reaction to United Airlines Corporation's bankruptcy filing. United Airlines is the only publicly traded company to have been majority-owned by an Employee Stock Ownership Plan (ESOP).

Employee ownership advocates are clearly disappointed that the widely-heralded employee ownership program at United Airlines turned sour, and that the company's employee ownership program did not enable the company to weather troubled times, either internal or external.

At the same time, it is not necessary for employee ownership advocates to express bitterness or dismay toward the cynics, who amid the media outcry with regard to United Airlines, are now smitten in their belief that employee ownership does not work.

Instead, employee ownership advocates, and particularly those believers in employee stock ownership plans (ESOPs), should welcome this new, national focus as to whether employee ownership can match the promises of the power of employee ownership.

To put the power of employee ownership in perspective, consider this: during the last 30 years, the vast majority of ESOP companies have yielded impressive results -- and many have outperformed their non-ESOP counterparts. United Airlines is a clear-cut example of lessons learned in the ESOP community during this period of time. In light of United, perhaps the "arm- chair critics" of employee ownership will recognize these lessons, and take time to objectively review the qualities that can make employee-owned companies much more successful than conventionally owned companies, as well as much more satisfying to those who are stakeholders in the company's future, especially including the employees.

Lesson one: For an employee-owned company to reach its potential, it is important to have everyone at the company, regardless of position or rank, committed to creating an ownership culture among employee owners. An ownership culture is formed in a participatory, empowered environment, where employee input is based on faith, trust and most importantly, knowledge.

Lesson two: Successful employee-owned companies have a strong commitment and time-consuming level of dedication among management and employee leaders to educate a work force about the free enterprise system, as to its risks and rewards. Absent this commitment, employee input often becomes a shouting match with management. Gridlock results, little is accomplished, and neither side has much respect for the other's opinions or thoughts.

Lesson three: Whether a business is employee-owned, singularly-owned, publicly owned, or owned by a group, a silk purse cannot be made out of sow's ear. In other words, employee ownership does not alter an external environment.

Lesson four: Creating employee ownership in a distressed company through lower pay, lower benefits, and, other so-called "wage concessions" in exchange for ownership leaves a bitter taste in employees mouths that makes the future even more difficult.

Lesson five: Research has demonstrated that more often than not, employee ownership has succeeded in privately owned companies with fewer than 1000 employees. Employee ownership has not yet established a track record of success by large, public employers that are majority owned by the employees.

It is lesson five that is the greatest challenge for those employee ownership advocates that believe that a majority of American employees should own a significant share of the companies where they work.

As for the critics of employee ownership, or more accurately, the cynics, who make the rather uninformed leap that United Airlines' experience with employee ownership through an ESOP proves employee ownership does not create more equitable and better performing companies -- Wake up! There is ample evidence that properly managed, employee-owned companies have a stellar record in the United States. And advocates for employee ownership need to take this opportunity -- with employee ownership at the forefront of so many major media outlets -- to prove to cynics and critics the power of employee ownership.

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Contact:
Allison Light
The ESOP Association
1-202-293-2971
[email protected]
http://www.esopassociation.org/


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