Soviets Tell Seminar of Employee-Ownership Struggles

When Vladimir Patrikeyev and his managers moved to convert their Moscow-based electrical engineering company from state control to employee ownership, they hoped to motivate workers and generate goodwill for their efforts.

Their plan was to allow workers to buy stock in the company. The company, MOEM, also introduced a compensation program that rewarded employees based on their contributions to the company.

Patrikeyev, 66, figured the changes would provide an incentive for workers to increase productivity and pay more attention to quality. But MOEM employees--and government agencies--strongly opposed the plan.

“Ministries and city governments who control parts of the enterprise were not ready to give up their authority,” Patrikeyev, chief executive of MOEM, said. “Local city council officials attempted to block our efforts by not signing the documents allowing us to transform MOEM” into an employee-owned company, Patrikeyev said.

Patrikeyev was one of four Soviet executives attending an Oct. 3 seminar at UC Irvine on motivating employees through company ownership. The conference, which ended Oct. 3, was attended by more than 80 executives from domestic companies that are part- or fully owned by their employees.

The meeting was sponsored by the Foundation for Enterprise Development, a La Jolla-based nonprofit group that works with companies that want to expand employee ownership. The foundation is funded largely by Science Applications International Corp. and Robert Beyster, SAIC’s founder and chief executive.

On Saturday, the four executives met with SAIC employees during the company’s annual employee picnic at SAIC’s campus-like facility in La Jolla. “The thing that really struck (the Russians) is feeling of family,” said Ronald Bernstein, the foundation’s associate director. “In Russia, the workers don’t feel that they’re part of the organization.”

While in San Diego, the Russians toured Brooktree Corp., where “they received a lessen in entrepreneurship,” Bernstein said. They also took part in a Monday press conference before returning to Russia.

Employee-owned companies, which are increasing in numbers in the United States, are catching on slowly in the Soviet Union, the Russians said. One reason is that workers often fear the loss of their jobs in a system that stresses rewards for individual performance, said Valery Varvarov, 51, a board member of BUTEC, an organization that represents more than 460 businesses, mostly in the Russian Republic, that have turned over all or part of their ownership to employees.

Moreover, Soviet workers have grown more distrustful of management as the Soviet economy has plunged into disarray, he said.

“There was either indifference to the shift (to employee ownership) or a vehement resistance, mostly from less-educated people who don’t trust management,” Varvarov said.

But Patrikeyev said the initial reluctance among MOEM’s employees has been overcome. Today, most of MOEM’s 3,000 employees own a share of the company, making it one of the first successful employee-owned companies in the Soviet Union.

Since Soviet President Mikhail S. Gorbachev allowed state-owned companies to privatize two years ago, some Soviet managers have been turning to employee ownership, which they liken to collective ownership, said Joseph R. Blasi, a Rutgers University management professor and co-author of “The New Owners,” a new book on employee ownership.

Beyster said the Soviet Union is fertile ground for increased employee ownership because the government still owns most industries.

“The government could give employees and management the companies and take a long-term note in return,” Beyster said. “That note could be paid off in 20 to 30 years, with the profits. And, as the note is paid off, (workers) would get more stock.”

Given Russia’s weak currency, “that’s about the only way they’re going to manage” the change from state ownership to private ownership, Beyster said.

The idea is that Soviet companies would improve their profits under employee ownership, allowing the worker-owners to pay back the government, Bernstein said.