28th January 2011
As the government pushes ahead with plans to encourage more employee ownership in public services, Jim McAuslan, General Secretary of the British Airline Pilots’ Association, offers a personal view on what employee ownership may offer and how trade unions will react.
After the collapse of Lehman’s Brothers the industrial relations scene in our industry hit turbulence. But we had learned some things post 9/11 and adopted what became known as our Rising to the Challenge toolkit. It involved 4 steps:
1. pressure testing employer warnings of imminent bankruptcy by having our accountants and corporate financiers do due diligence (subject to confidentiality agreement)
2. finding ways to save jobs - short term working, sabbaticals, pay cuts and the like
3. agreeing processes when redundancy was inevitable and
4. helping members that had been let go to find jobs.
In two companies (BA and Thomas Cook) part of the package of solutions saw us negotiate equity in return for pay cuts through share ownership schemes.
We have started to dabble in employee ownership, but it is only dabbling. The schemes are restricted to pilots (no other staff group seemed interested) so there is no tax advantage, and in terms of company capitalisation it is small beer. Where the journeys in BA or Cooks will lead I know not; nor do I know if this is the right way for unions to go.
Indeed, there is a broad range of views from generally supportive through to outright hostility (of which more later) with the predominant view probably being indifference with a tendency to view employee ownership as snake medicine aimed at tricking workers into giving up their rights.
What there is definitely not is active leadership and championing by unions of the concept, which is surprising. Unions’ origins lie in guilds; people coming together to maintain standards. Unions were part of the cooperative movement which lies deep in the psyche of industrial towns. Unions talk romantically of Mondragon as a worker ideal. Yet unions are deeply suspicious of employee ownership. Why?
Perhaps it is just reflective of unions’ suspicion with anything to do with how businesses operate and of us being involved. We loved the frustration of the Thatcher years and not being consulted. In 1997 Labour came in and we were offered a partnership agenda followed by the introduction of European style Information and Consultation rights. Yet within a few years partnership became a dirty word – collaboration with employers was synonymous with collaborators - and today the rights of the ICE directive does not figure in unions’ thinking at all. Truth is (and this is a sweeping generalisation) we are deeply uncomfortable with tough decisions. Our preferred method of business is claim, negotiate, fall out, strike deal and then start all over again next year. It is a ritual we are used to; it’s safe.
But before we get carried away in lampooning unions let’s look at employers. My day job involves meeting CEOs and MDs on a regular basis. There are always two things on their radar - an upcoming analyst meeting or the threat of a strike.
The truth is that the goal of delivering shareholder value by increasing profits and the quarterly price of shares has progressively been seen as the only viable business strategy. And it is clear to unions that the blinkered pursuit of shareholder value is bad for workers. Indeed, a number of scholars have highlighted something of an elective affinity between the rise of ‘shareholder value’ (stitched together with a corporate law system orientated to that metric) with rising levels of job insecurity, work intensification and lowering investments in training and skills.
Moreover, highly liquid markets, dispersed share ownership, hostile takeover bids and the fundamental importance of institutional investors that entrench the importance of shareholder value, force the CEOs that I meet to orient their businesses to short-term shareholder demands.
As a result, employee participation and collective bargaining take second place as they complicate and hinder the drive to create short-term shareholder value.
The impact of private equity ownership on work is mixed and inconclusive. On the one hand, freedom from the demands of diverse shareholders or short-term pressure from stock markets may enable managements the breathing space for decisive but long term action. But on the other hand, there are too many examples of highly leveraged loans turning possible success stories into basket cases.
So my CEO has the power of the investor meeting bearing down on him or her and at present the only effective counter-balance to get their attention is the threat of strike. That’s the long and short of it – the industrial relations agenda is no more than one of mutual self-destruction.
Yet this is not what workers want. I would contend workers want 6 things:
1. Secure and interesting jobs that are fulfilling, which contribute to the achievement of high performance and sustainable business success;
2. A style and ethos of management that is based on high levels of trust and recognises that managing people fairly and effectively is crucial to skilled work and high performance;
3. Choice, flexibility and control over working hours;
4. Autonomy and control over the pace of work and the working environment;
5. Voice for workers in the critical employer decisions that affect their futures.
6. And they want to be appreciated and affirmed. That is the deep longing in the soul that people want and what happens at work validates them as a human.
But simply including employees in ownership will not tick these 6 boxes nor do enough to link their interests with that of the company. Indeed, it is quite possible to devolve ownership and still fail to secure a fundamental change in outlook. At BA and Cook’s we have share ownership but the average pilot feels they have little influence.
Perhaps by addressing these 6 things workers want we may pave the way for more open thinking on ownership and a more positive leadership from unions. And, based on my BA and Thomas Cook’s experience, I would argue that what matters more than turning stakeholders into shareholders is the translation of shareholding into democratic, political and constitutional arrangements. When ownership brings influence over the decision-making, core purpose and the structure of organisations, this, when coupled with ownership of shares, is arguably more critical. Richard Reeves in his report on co-owned companies argues that:
‘there is no direct causal evidence for a link between co-ownership and worker happiness. However, there is research relating worker wellbeing to a range of factors – including autonomy, trust, respect, involvement and information – which are also characteristic of co-owned organisations.’
In all this we are up against UK PLC’s financial architecture in which private decisions produce a rampant and degenerate capitalism. Employee ownership could be an important alternative. So I close by returning to my thoughts on why, with an alternative model of employee ownership as a way of changing the architecture, there is an apparent increasing hostility from union. I detect 5 reasons:
1. Unions default position is still to support nationalisation – arguably a mutualisation that trumps any other. So when employee share ownership is posed as an alternative to privatisation (anathema still to most) unions are deeply suspicious and it is these talismans that draw the territory in which unions’ general attitude to employee ownership is formed.
2. Unions are not their members. I am sure most are democratic (elections and strike ballots are legal requirements) but democracy takes many forms and open debates that generate options rather than resolutions are not common place in unions. Branch meetings and conferences attended by the few are the norm and it is in those crucibles that union policy is fired. The individual who proposes alternatives or experiments in thinking ‘ownership’ will quickly be made to feel out of place. It takes courage to swim against the flow and frankly unions prefer a position of opposition.
3. Representatives and even full time officers are not at home with balance sheets and financial planning. Our fear of being confronted with such makes us shy away from even engaging in the debate.
4. Management Buy Outs (MBOs) and private equity have been typified by a few making big gains at the expense of others and often from a position when the company was on its uppers. So there is a twofold deep suspicion of management in the minds of workers a) of their motives (private gain) and b) of their management’s ability – after all they got us into this mess in the first place and a fear that with them in charge the business is doomed come what may.
5. And are economists really wrong when they say employee owners tend to favour their own self-interest over that of the firm, and will orient themselves to short-term gains over the long-term health of the company or that in this environment decision-making becomes diffuse and supervision lax? That was the experience in United Airlines. Maybe workers just don’t trust each other
So in conclusion. Unions are ambivalent at best and becoming more hostile with talismans such as the post office and MBOs that line the pockets of a few setting our policy of what we are against, rather than what we are for.
Workers want 6 things from their jobs, and ownership is not amongst them. But it could be a natural progression. The UK needs new architecture and employee share ownership could be one, but if we want more, then Government needs a more flexible tax regime and there needs to be ways of translating shareholding into democratic, political and constitutional control. Unions could be a medium for that control, but the evidence at present is that there is not the will. We need to encourage the courage and leadership of the few nuggets out there and publicise their successes, and I pay tribute to Employee Ownership Association for flying the flag.
Jim McAuslan is general secretary of BALPA, the airline pilots' union. This piece is based on comments originally made at the Employee Ownership Association’s annual conference.
