The Overlooked Story at AFL-CIO Council

The rage, the shouting and the name calling between officers of one union stole the headlines last week when the nation’s top labor leaders gathered for the annual AFL-CIO executive council in Bal Harbour, Fla. But the real news went almost unnoticed at a press conference given in the same hotel about the same time by a few seemingly dull men. They were calmly discussing labor’s profound interest in corporate finances, the stock market--and the horrendous problems of Eastern Airlines.

News reporters from across the nation were understandably attracted to the drama of local and national officers of the United Food and Commercial Workers furiously denouncing one another while arguing over tactics in the long, bitter strike against the Geo. A. Hormel & Co. pork-processing plant in Austin, Minn.

It was clearly the most exciting, best-reported event of the usually staid winter meeting of the executive council in Bal Harbour, and the outcome of the Hormel dispute could affect the entire meatpacking industry.

The UFCW leaders were arguing over whether there could be, or should be, a quick settlement of the prolonged strike. But it was the shouting and name calling--”liar!” “betrayer of the workers!”--that made the argument a media event.

Neither the union officials nor the media paid much attention to a fact of enormous significance: All of the UFCW officers were very well informed about almost every detail of Hormel’s corporate problems.

At another sparsely attended news conference were discussions that had even broader ramifications. There, Eugene J. Keilin, of the New York investment firm of Lazard Freres, and Brian M. Freeman, a Washington-based financial consultant, talked unemotionally about fundamental changes in the relations between management and labor within American capitalism. Keilin and Freeman, like an increasing number of other financial investors and advisers, are selling their corporate and stock-market expertise to workers and their unions.

The two men first talked in private with national union leaders about the rapidly growing and potentially enormous new role that labor is playing in corporate life. Then, at the news conference arranged by the AFL-CIO, they cautiously described some of the corporate strategies that unions are using in dealing with such controversial companies as Eastern Airlines.

Almost overnight, labor has, indeed, become a major player in the internal workings of many of America’s largest corporations.

For instance, by working with rival corporate executives, unions were the major factor in blocking the attempt by Texas Air Corp.’s Francisco A. (Frank) Lorenzo to take over Trans World and Frontier airlines.

Even though Lorenzo apparently succeeded Monday in his bid to take over Eastern, several union leaders at Eastern are still working behind to scenes to block Lorenzo again because he makes little secret of his contempt for unions and because he destroyed all the unions at another property of his--Continental Airlines.

Eastern’s employees own nearly 25% of the company’s stock and have four members on its 16-member board of directors. But public attention has focused far more on the substantial pay cuts that unionized workers have been taking at Eastern than on their role as direct--although minority--participants in the corporation’s management.

The UFCW’s knowledge of Hormel’s relatively healthy corporate situation is largely the result of a “corporate campaign” against Hormel run by Ray Rogers, the combative, New York-based union consultant.

Corporate campaigns are being waged in increasing numbers by unions battling managements. Their success depends on the union having an intimate knowledge of the company’s inner workings. That knowledge can be used either to bolster a strike or give the unions a far more informed, and therefore stronger, position at the bargaining table. The AFL-CIO itself, several of its departments and a host of individual unions and independent consultants are looking to corporate campaigns as a new weapon in labor-management hostilities.

And now, more than ever before, unions are also learning about the inside of corporate life through another, non-adversarial route: by participating in industrial democracy programs where companies give workers a greater voice in corporate decision-making and share once-secret company plans.

In Western Europe, most unions are led by socialists of one kind or another who regularly, although without much hope of success, call for an end to capitalism. Nevertheless, European workers, usually by law, have for years been represented on corporate boards of directors and are kept fully informed about almost all finances and corporate decisions. In contrast, ever since they were first created in the last century, U.S. unions with rare exceptions have been led by supporters of capitalism. But, until recently, their role in the system has been limited, and the United States has no laws requiring companies to share decision-making powers or even information about corporate finances with workers or their representatives.

True, a small number of U.S. union leaders have from time to time supported calls for some variation of socialism. And, in the 1940s, some unions were ousted from the old Congress of Industrial Organizations (later merged to form the AFL-CIO) for having leaders with alleged ties to the Communist Party, even though those left-wing unionists rarely if ever talked about overthrowing the capitalist system.

But, in practice, U.S. unions traditionally have left it to management to operate the companies profitably and to keep track of corporate finances and the value and ownership of company stock. The unions’ role had been simply to define workers’ needs and get them as large a share of the company’s profits as possible through contract negotiations.

Now, however, labor’s role in corporate affairs has expanded rapidly, and today U.S. unions are often as intimately involved in and knowledgeable about corporations as their more radical-sounding European counterparts.

Even though it doesn’t always work out well, as clearly shown at Eastern, this isn’t the time to stop expanding the role of workers--and, where they have them, their unions--in corporate affairs. True worker participation can be achieved only when workers and managers are equals so they can jointly bring about a more prosperous and productive economic life.

The Rise of ESOPs

While workers and unions are playing a rapidly increasing role in America’s corporate life, the real power still lies primarily in the hands of corporate executives.

The most effective way for workers to gain authority in companies is by owning stock in their firms, and more and more workers are becoming shareholders.

So far, however, that has done little to make stock-holding workers into decisive forces in “their” companies. Individual workers have only tiny fractions of the total shares of their companies, and, unless they combine the strength of their individual holdings, they aren’t going to be significant factors in corporate decision-making.

Congress has given substantial tax breaks to firms that adopt employee stock ownership plans, and today, an estimated 8,000 firms employing about 11 million workers have some form of an ESOP, according to Corey Rosen, head of the Washington-based National Center for Employee Ownership.

The ESOP companies have assets of about $20 billion, which, while substantial, are a small proportion of the more than $2 trillion in assets of all U.S. companies.

Workers in ESOP firms are usually fairly conservative shareholders, tending to vote their stock in support of management. And most companies create ESOPs for the tax breaks they get and as a relatively inexpensive fringe benefit for their employees--not as a way to share power.

Firm estimates are not available, but Rosen said that about 500 companies now have worker representatives on their boards. Such representation is found most often in the trucking and airline industries and is part of a trend that gained national attention in 1980 when, as partial payment for major contract concessions, Chrysler put then-United Auto Workers President Douglas Fraser on its board. The next big push toward worker representation on corporate boards is expected to come in the steel industry, where contract negotiations are beginning.

About a million workers own the majority of stock in more than 1,000 firms across the nation, nearly half of which are actually worker-owned and -operated. In 1975, fewer that 10,000 workers owned the majority of stock in their companies, and Rosen estimates that the number could jump to well over 10 million within a decade.

While there are still no signs of any radical change in the U.S. economic system, corporate executives may gradually have to give more decision-making power to their employees as workers increase their shares of corporate stock, a trend that could benefit the entire economy.