Posted by:
Steve Dubb
Employees will soon own a 60 percent share of the paper.
The Chicago Tribune reports that under a deal approved by the Tribune’s board, employees will soon own a 60 percent share of the paper.
A related Tribune article written just before the deal was approved, outlines some key issues: As is often the case with mainstream press articles on employee stock ownership plan companies (ESOPs), the article goes through the laundry list of prominent ESOP failures—most notably United Airlines and Enron. Yet, as the article also notes: “about 1 in 10 American workers toils in a company where employees have an ownership stake, according to the ESOP Association.” So will employee ownership at the Tribune be boon or bane?
As Corey Rosen, founder and CEO of the nonprofit National Center for Employee Ownership, shows in an article outlining the likely deal: it depends. One reason to worry about the Tribune case: normally ESOPs are created not to “save the company,” but rather to allow family business owners to sell the business, but keep it operating with their employees in charge, while receiving a tax benefit. When workers are asked to accept reduced wages or reduced 401(k) contributions in exchange for becoming employee-owners in an ESOP, they are right to at a minimum be cautious, if not downright suspicious.
An even more critical issue, as Rosen points out, is whether worker ownership is made meaningful for Tribune employees. As Rosen writes, “Two decades of research on employee ownership and corporate performance have produced a remarkably consistent and robust result. ESOP companies grow about 2% to 3% per year faster in sales, employment, and productivity than they would be expected to grow absent an ESOP …That difference, however, is accounted for entirely by the companies that combine the ESOP with a high-involvement, open-book management approach … companies with top-down management approaches actually do worse post-ESOP. They have raised expectations, and then failed to meet them.”