US airline workers debate ownership plan


By Malik Miah and Rich Lesnik

By mid-year the largest airline in the country, United Airlines, could be "controlled" by its union employees. Leaders of the machinists' and pilots' unions say an Employee Stock Ownership Plan (ESOP) is the best way to protect union jobs. The loss in pay and benefits for the employees in exchange for 53% stock ownership is considered secondary to achieving this "job protection plan".

What is the truth about the ESOP? Is the ESOP a way for workers to obtain control over their jobs? Should workers support employee ownership?

There are several problems with an ESOP from the point of view of workers and unionists. For one, it mixes bosses with employees. We are supposed to be "owners" and "employees" at the same company. The front of our hat says "owner" and the back says "worker". It implies that you as an owner can tell you as a worker to speed up and work harder to improve the profits of "your" company.

But an ESOP won't change the basic relationship between workers and bosses in the marketplace. We remain employees whether we own stock in the company or not. An ESOP does give top management an important advantage: more employees believe labour and management have the same interests. Who needs a union? Some workers at United are already asking if union dues end with the ESOP. Management wants workers to be anti-union and against worker solidarity. They will encourage workers to fink on co-workers for not working hard enough.

The ESOP will increase divisiveness in the workplace. An ESOP company, like all companies, operates in the capitalist marketplace. It must make a large enough profit to satisfy all its shareholders and lenders. Thus the ESOP company will demand work rule changes and concessions from the workers again and again, just as current owners do, to stay "competitive".

Weirton Steel example

A case in point is Weirton Steel in Weirton, West Virginia. It has had an ESOP for 10 years. The workers, organised by the Independent Steelworkers Union, agreed to major concessions to "buy" the company. In the first five years there was labour peace because the company was profitable. In fact, workers cut corners at unprecedented levels to step up production.

But in the last five years, as earnings declined, top management asked for more concessions. A new CEO was brought in, and the board of directors, which is not controlled by the union, began taking steps to dilute the stock of the so-called employee-owners. As one Weirton worker put it: "We felt what we were doing was best for the company [through pay cuts and lay-offs]. I won't do that today."

At United Airlines we will take major pay cuts, with no snap-backs after the ESOP stock is purchased. We are promised "job security". Yet, the new board of directors will have only two or three union representatives. But even if the unions had a majority of board seats, UAL would still operate in the marketplace. A leader of the pilots' union told the MacNeil, Lehrer Report on December 23 that if UAL faces hard times soon, even under the ESOP with its "no lay-off" clause, the "hard decision" would be made by the unions to support reducing the work force.

This puts into perspective the other ESOP clause that "guarantees" the union representatives on the board veto power over certain asset sales. This safety clause lasts, in fact, for only the first six years. But like the "no lay-off" clause, the "no sale of assets" clause is contingent on the health of the economy and how the airline fares in the marketplace (as is true today).

Ownership of stock is not the same as control. Eugene Kellin, an investment banker involved in the UAL deal, reassured the Wall Street Journal that management will clearly call the shots at United after the ESOP goes through.

"The company is run like any other company, by a CEO and a management selected by him who is responsible to the board of directors", he said. "There are provisions in this deal", he added, "to issue additional equity" if management believes it's the right course. Under capitalism, the market rules unless labour forces it to bend. That's why we have unions. It is why we will need an even stronger independent union with or without ESOP. The top union leaders are selling us an illusion of control. But it is not true.

Job security?

The claim that workers will have "job security" through an ESOP is misleading at best. United Airlines, like other businesses, will decide on lay-offs, as the ALPA leader said, based on its profitability over the next six years under the ESOP. The "no lay-off" clause in the ESOP deal is only a hope. Whether workers have a large or small percentage of stock does not change who runs the company.

At Eastern Airlines, workers had more than 37% employee ownership, more than enough under ordinary circumstances to assure controlling interest in a publicly traded company. But the union did not have control.

The ESOP prepared for the disaster at Eastern. It gave false hopes to the employees. The union's large shareholdings and one representative on the board of directors were not enough to prevent Frank Lorenzo from buying out the company and destroying the airline. There are hundreds of former Eastern employees now working at United who joke about what they do with their worthless stock.

There are minority ESOPs at Northwest and TWA today. As at UAL, the International Association of Machinists has a representative on the board. In truth, board membership ties the IAM more into the plans of the management. Does this protect the average union member's interests? It didn't at Eastern.

The Clinton administration is supporting United's ESOP and the concept of employee ownership. According to the Wall Street Journal, "Labor Secretary Robert Reich helped broker the buyout negotiations between UAL Corp.'s United Airlines and its unions over the past several weeks." Clinton's airline commission also recommended more labour-management cooperation in union and non-union situations.

Why the gung ho approach? Because ESOPs get what all managers want: lower labour costs and work rule changes without a fight by labour. Without ESOP there would be "war" at United and other companies attempting to drastically cut wages and worsen working conditions that were won over decades of struggles. ESOPs are not a victory for labour. They demobilise unions and put us in a much weaker position for the inevitable battles down the road.


In truth this ESOP is a fancy name for concessions. The top union leaders would be more honest to say so: "We don't believe we can win against management, so we believe major concessions are the way to save jobs". They don't say this. Instead, they sell us a bill of goods about the need for us to "control" our companies through employee ownership.

The ESOP sugar-coating is a ruse to get us to swallow the poison pill without putting up a fight. At UAL (United's parent corporation), CEO Stephen Wolf will have what he demanded from day one: lower labour costs through major wage concessions, an end to the paid lunch and weaker work rules. (And he walks away with tens of millions as his golden parachute!)

In any battle with employers, it may be necessary to concede some issues, based on the relationship of forces in the struggle. All workers fear for their jobs in today's economic times. But to give in without waging a fight weakens our potential for solidarity and unity in future battles.

The top union leaders say, "ESOP or no jobs". The IAM international leadership has had this approach for more than a decade. But it is a flawed strategy. There is always an alternative strategy to ESOP or capitulation to top management. It is to organise a fight against the board of directors and demand they junk their union-busting plans.

They always tell workers, "Take it or else." We must say, "No" and organise a fight. We should plan to go to other workers for support, as the coal miners just did to help win their strike, and as we have done in the past.
Malik Miah and Rich Lesnik are employed by United Airlines in San Francisco. They are elected shop stewards at Local Lodge 1781 of the International Association of Machinists.
[From Independent Politics (US).]

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