Utility Resists Adding Union Official to Firm’s Directors
Executives of Pacific Enterprises, parent of Southern California Gas Co., act as if they created a monster when they set up a stock ownership plan for the gas company’s employees.
The executives apparently have been frightened and angered by a serious campaign among the worker/shareholders to elect just one union official to Pacific Enterprises’ 15-member board of directors.
The company hired Georgeson & Co.--at a cost of $60,000--to wage a proxy fight against the workers’ candidate. Pacific figures it will spend at least $260,000 overall in the battle.
Letters have gone to employees from the gas company’s chief executive, Richard Farman, alerting them to what he sees as the danger of their attempt to win a seat on Pacific’s board.
The company has its own slate of 15 incumbent directors, all of whom “understand business and are proven leaders,” Farman wrote, not so subtly slapping the leadership and business talents of union leaders elected by the workers.
Farman makes it sound as though the idea of worker representatives on boards of directors is outrageous and revolutionary. It is neither.
Most major European nations have laws requiring worker representation on corporate boards as a means of democratizing industry and giving workers a meaningful voice in company affairs.
That valuable practice is now being used by upwards of 1,000 companies in the United States. It is part of a growing trend to replace adversarial relations with cooperation between labor and management, giving workers a role in company decision-making at all levels.
In fact, the current battle over Eastern Airlines’ future centers on proposals to give employees a 30% share of the firm and significant representation on the board.
While some stock-owning workers do have representatives on boards, far more do not.
In 1975, only an estimated 250,000 workers were in some kind of formal employee stock ownership plan. Today, more than 10 million employees own an estimated $35 billion worth of stock in the companies for which they work.
The number of companies with worker representatives on boards is also increasing, and executives of those firms seem quite pleased.
“We’ve surveyed executives of most companies that have worker/directors and we didn’t find any who regretted the move,” said Corey Rosen, director of the National Center for Employee Ownership, a nonprofit organization based in Oakland.
In fact, Corey says the experience so far has been “uniformly bland, not revolutionary, even though some executives look on the idea as a life-and-death matter, at least until they actually try it.”
Usually, workers wait for an invitation to put representatives on corporate boards. The Utility Workers of America, which represents about 6,000 of the 9,000 workers at Southern California Gas, suggested the idea three years ago, but the company flatly rejected the proposal.
So this year, the union decided to put on a proxy fight to elect Sam Weinstein, the union’s regional director, as a Pacific director. Its campaign may cost about $20,000. Also, more than 150 union volunteers are out soliciting proxy votes for Weinstein from workers on and off the job.
The corporate executives have the enormous advantages of company money and immediate access to all stockholders in their battle against a worker/director.
So far, the company has refused to give the union the names and addresses of stockholders, saying each stockholder must agree in writing to accept a letter asking for a proxy vote from the union.
But the union candidate has an advantage, too: California’s cumulative corporate voting law allows Pacific stockholders to vote 15 times for Weinstein if they don’t vote for any candidate on the company slate.
Only Pacific’s gas company workers are in an employee stock ownership plan. Excluded are workers at such subsidiaries as Thrifty Corp. Even so, gas company workers have an estimated 7% of the company stock and that means Weinstein has a chance of victory in the proxy fight if the workers “single shot” all of their votes for him.
Results of the proxy fight will be announced at the stockholders’ usually rubber-stampish annual meeting May 11.
Farman argues that a corporate director’s primary responsibility is to the shareholders, and a worker/director would have a conflict of interest, torn between the needs of the employees and those of the shareholders.
The company executives themselves created what they now see as a threat to their power when they made the workers shareholders.
That gave the employees an interest in the prosperity of the company both as shareholders and as workers and Weinstein, presumably, can reflect those dual interests since they are not necessarily in conflict.
Douglas Fraser, former president of the United Auto Workers, was put on Chrysler’s board of directors in 1980. Initially, Chrysler executives opposed the selection of Fraser, but they came to realize his substantial contribution to the board’s deliberations.
Also, Chrysler workers were given a better understanding of why certain board decisions were made, even if, on occasion, Fraser didn’t vote with the majority.
The reason behind Pacific’s furious fight against a worker/shareholder as a company director might seem more rational if there had been a background of ugly labor-management struggles.
But labor relations at the gas company generally have been harmonious, with only one strike in the company’s history.
Even if Weinstein is elected, his one vote on the board will hardly put the workers in a position to thwart decisions by the other 14 incumbent directors.
However, he could give company policy makers some useful new ideas, and that might not hurt since the firm’s stock isn’t doing so well these days anyway, a fact that must be as painful to worker/shareholders as to all others who own Pacific stock.
