Critical thinking skills and applications

¶ … Democratization of Wealth

In the introduction to Part II, the author introduces the concept of wealth democratization and the ideal of the Pluralist Commonwealth. The principle of wealth democratization hinges on institutional and legislative changes that enable the redistribution of wealth. Not only does the democratization of wealth reduce overall income disparity, it can also improve overall productivity. The democratization of wealth is not a pipe dream. Working examples of wealth democratization are outlined in the following chapter of the book. The author asserts that thousands of real-world examples of successful wealth democratization show how effective policy can transform the American socio-economic and political landscape.

Publicizing the successful employee-owned companies in the United States helps draw attention to the feasibility of the Pluralist Commonwealth. Moreover, we can learn from these thousands of examples and derive lessons for future policy development. The plethora of employee-owned companies show that legislation and policy change with the goal of wealth redistribution have already occurred and have helped millions of American workers. Thus, the author claims that the key question is not whether such policies are viable but when and how they can be systematically implemented. The successful case studies presented in Chapter 7 can become a foundation for future public policy change and creative corporate restructuring.

Chapter 7 "A Direct Stake in Economic Life: Worker-Owned Firms."

The democratization of wealth benefits workers, their communities, and the firms that sustain them. Workers who receive stock shares or options can increase their potential long-term earnings substantially over even unionized workers. In many cases, employees receive full voting rights in their firms and may even participate fully in the corporate decision-making process. Communities that sustain worker-owned firms benefit because worker-owned firms continually feed their wealth back into the community. Furthermore, employees of worker-owned firms take pride in their firms, channeling more energy and enthusiasm into their jobs and therefore increasing overall productivity. Because the benefits of worker-owned corporations have become well-known, instances of worker-owned companies are on the rise in the United States. The increase is largely due to legislation passed in the 1970s that offered tax incentives to companies with Employee Stock Ownership Plans (ESOPs). Sales growth can also be substantially higher in ESOP companies. ESOP companies can also avert disasters related to plant closures or the effects of globalization. Similarly, ESOP-friendly legislation may allow workers the opportunity to buy out a retiring owner. The key to understanding why ESOPs benefit their communities is that while multinational corporations seek the highest possible profits at any cost, worker-owned corporations seek high profits without sacrificing quality of life.

ESOPs are becoming increasingly commonplace and many notable corporations participate in ESOP plans. Individuals who work for ESOP companies earn more on average than their non-ESOP counterparts. Their retirement funds are far more attractive too, and the trend in ESOPs is progressively moving toward full ownership rights for employees. Some examples of employee-owned firms include the Appleton paper company in Wisconsin, Reflexite Optics in Connecticut, Western Solutions, and the Gore-Tex corporation, which the author notes has one of the best ESOP plans in the country. One of the reasons why we have witnessed an increase in worker-owned corporations is due to 1974 federal legislation that proffers tax benefits to firms that implement ESOPs. In some cases ESOPs only give workers stock, without enabling ownership rights. An ESOP acts as a trust that receives and holds stock on behalf of the employees (82). Tax incentives have stimulated interest in ESOPs but their proliferation is also testimonial for their effectiveness in improving productivity, worker morale, and community-wide prosperity. Hourly wages are higher for employees in ESOP firms and retirement benefits are as much as three times as high compared with non-ESOP workers. State governments also help firms transition to employee ownership. Ohio, Michigan, and Massachusetts have the strongest programs that offer feasibility studies that help company owners evaluate the feasibility of worker buyouts or aid the transition of a firm into employee ownership.