By Dave Lindorff

What’s wrong with this picture: Four groups invest in a company.
One group puts in a 55% investment, a second puts in a 20-35%
investment, a third puts in an 8% investment and a fourth goes in for
2%. The group putting in the 20-35% stake gets three seats on the
company’s nine-member board of directors, which will be appointing the
new company’s management team. The group investing 8% gets four board
members, and the group investing 2% gets 1 seat. Finally, the group
that will hold the majority stake in the company, 55% of the shares,
gets…the one remaining seat on the board.

Why would anyone buy a majority stake in the company and accept
only a 1/9 representation on the board, and thus virtually no say in
the selection of management or in management decisions?

The answer is that that particular shareholder is the unionized
workforce of the company—in this case Chrysler Corp. One seat is all
the workers were offered in the Obama Administration-brokered deal.

Under the plan worked out by the White House, Chrysler management,
Fiat and the company’s lenders, Fiat, the Italian automaker, will take
a stake of somewhere between 20-35% of the bankrupt American automaker,
getting a third of the board for its efforts. The US government, which
has provided and will continue to provide billions of dollars in loans
and guarantees to underwrite the rescue plan, will get an 8% ownership
but an outsized four members on the board in return, and Canada, for
just a 2% stake, will also get one seat on the board.

Logically, Chrysler workers, who will be covering half of the
company’s $10 billion obligation for retiree health care (putting their
own future health care at risk should the venture fail), and who have
agreed to significant cuts in wages, benefits and work rules that had
been negotiated over years of struggle, should clearly be getting five
of the seats on the board and the right to name the company’s new
management team, but that would smack of socialism, apparently.

Imagine workers actually being in charge! Preposterous, right?

Of course, if you step back a minute and think about it, it was
corporate managers, put in place by boards of directors who represent
the elite of the Wall Street investment crowd, who have run most
American companies, and indeed the whole US economy, into a ditch.
These supposedly smart folks with their fancy MBAs and PhDs and law
degrees have outsourced jobs, pillaged the environment, destroyed
communities, piled on debt, failed to modernize and invest in R&D,
laid off highly skilled workers in favor of lower paid, less skilled
workers, poisoned and injured their own workforces, made stupid
acquisitions motivated by a desire to aggrandize more power or more
market share, rather than to achieve real synergies, and have pilfered
corporate resources to boost their own undeserved obscene levels of
compensation.

How, on reflection, could a worker-run company—and I mean a real worker-run
company where the board is in the hands of the workers, and the workers
chose and hire and fire the managers—do any worse than what we’ve seen
over the last decade?

There is an irony here. Corporate lobbyists have been battling
against the Employee Free Choice Act, a labor law reform bill in
Congress which would eliminate the need for workers to go through a
supervised secret-ballot election in order to win representation of a
union at their workplace, substituting the requirement that organizers
simply obtain signed cards calling for a union from a majority of the
workers at a workplace. The corporate argument against this reform is
that it violates the “sanctity” of “one person, one vote”.

And yet, here we have not only a much larger number of people—the
27,000 unionized workers at Chrysler—but also the holders of a much
greater number of shares than everyone else combined, getting only a
tiny fraction of the vote. That glaring inequity doesn’t seem to bother
the corporate elite and their elected servants in Washington one bit.
And it’s actually even worse than it looks on its face. Chrysler’s
unionized workers don’t even have a direct vote to control their own
shares, which are actually controlled by a trust fund headed by a group
of “independent” trustees not chosen by the workers. (“Independent”
means “not controlled by the workers.”)

Chances are, if Chrysler were really placed in the hands of its
workers, it would be a great success. Workers, after all, need to think
long term. Their key motivation is to have a company that will provide
them with jobs and wages until retirement, and with a decent, secure
retirement pension for the rest of their lives. That is exactly the
kind of motivation that we should have in our companies, and in our
corporate management suites.

It is not what we have right now.

As a long-time business journalist, I can tell you that you would
have to search long and hard to find a management in American business
that is thinking even five years ahead. One or two years would be more
common, and plenty are focused on the short end of that span.

A genuinely worker-run Chrysler would not be putting golden
parachutes in the contracts it offers to new top managers, nor would it
be giving them annual performance bonuses. It would not be paying those
managers 50-200 times what an assembly-line worker makes. It would not
be making gas-guzzling SUVs and high-end sports cars. Instead of trying
for quick sales of high-priced vehicles aimed at boosting earnings for
the next quarter, it would be designing and making cars that Americans
need, and that would propel the company’s sales and earnings for
decades to come.

Actually, we’ve been here before. When Chrysler almost went belly
up the last time, back in the economic crisis of 1979, it was rescued
with a $1.5-billion government loan. At that time, the workers, then
three times more numerous, also took pay cuts and benefit cuts, and in
return were given a seat on the corporate board, held by then UAW
President Douglas Fraser (who died last year at 91), but no real say in
management. Fraser’s appointment—the first ever of a union executive or
representative to a corporate board—was seen as a shocking development,
but he was never more than a token. The company’s management, headed by
Lee Iacocca, proceeded to ignore the 1973 gas crisis and its early
warning about the need for energy-efficient cars, which were in any
event fueling the import surge of cars from Japan and elsewhere, and
went off in the direction of short-term gain, building vans and trucks,
and paving the way for Chrysler’s next crisis in the 1990s, when it
ended up being taken over for a song by the private equity group
Cerberus, then by Germany’s Daimler, finally ending with the current
near-death experience.

Odds are, had Chrysler been worker-run back in 1979, the company would be in a wholly different place today.

The trouble is that what is deceptively called “worker-ownership”
here in America, with the exception of some very small companies and
co-operatives, is in reality just a carefully circumscribed rip-off
scheme, in which workers surrender their assets and swallow pay raises,
and maybe get a token representative on the board, but end up being
systematically excluded from any significant role in managing “their”
company, which is actually run by a board composed of the agents of
banks, institutional investors and other owners.

The only difference this time around is that the governments of the
US and Canada will now have majority control of Chrysler’s board.
Perhaps the board members appointed by those two public investors will
act more in the interests of the workers at Chrysler, and in the
long-term interest of both Chrysler and of the two countries, the US
and Canada. But given that President Obama has put this nation’s
economic management in the hands of the very people who helped bring
the US economy to its knees, and that Canada is currently being run by
a conservative prime minister, the odds of this happening seem pretty
slight.
_____________________
DAVE LINDORFF is a Philadelphia-based journalist (and is webmaster
of a worker-owned and run blog called ThisCantBeHappening.net). His
latest book is “The Case for Impeachment” (St. Martin’s Press, 2006).
His work is available at www.thiscantbehappening.net