Friday, February 11, 2011


One topic of Catholic Social Teaching often overlooked, or just not well broadcast is employee ownership. Collective ownership is often associated with the ills of Socialism, but in contrast to this socialist idea of collective ownership is another that I will call employee ownership of the equity/capital of the firm.

Here are the Popes on such partnership-contracts:

We consider it more advisable, however, in the present condition of human society that, so far as is possible, the work-contract be somewhat modified by a partnership-contract, as is already being done in various ways and with no small advantage to workers and owners. Workers and other employees thus become sharers in ownership or management or participate in some fashion in the profits received. -- Quadragesimo Anno, pp.65

In this connection, as Our Predecessor clearly points out, it is advisable in the present circumstances that the wage-contract be somewhat modified by applying to it elements taken from the contract of partnership, so that "wage-earners and other employees participate in the ownership or the management, or in some way share in the profits." -- Mater et Magistra, pp.32

The relationship between labour and capital also finds expression when workers participate in ownership, management and profits. This is an all-too-often overlooked requirement and it should be given greater consideration. “On the basis of his work each person is fully entitled to consider himself a part-owner of the great workbench where he is working with everyone else. A way towards that goal could be found by associating labour with the ownership of capital, as far as possible, and by producing a wide range of intermediate bodies with economic, social and cultural purposes. These would be bodies enjoying real autonomy with regard to public authorities, pursuing their specific aims in honest collaboration with each other and in subordination to the demands of the common good. These would be living communities both in form and in substance, as members of each body would be looked upon and treated as persons and encouraged to take an active part in the life of the body”. The new ways that work is organized, where knowledge is of greater account than the mere ownership of the means of production, concretely shows that work, because of its subjective character, entails the right to participate. This awareness must be firmly in place in order to evaluate the proper place of work in the process of production and to find ways of participation that are in line with the subjectivity of work in the distinctive circumstances of different concrete situations. -- Compendium of Catholic Social Doctrine, pp.281, taken mostly from Laborem Exercens

We see from these excerpts that CST calls for partnership-contracts as a way to improve labor-capital relations and as a middle ground between socialism and liberalism. It enables the workers to share in the produce of the company and to take on greater responsibility for the work that they do. Monitoring by a supervisor or manager would be less necessary as employees would monitor themselves because they all have a stake in the success of the business. Alienation and shirking increase the further workers are separated from this sharing in the stake of the firm.

A professor at my school is currently gathering data for a project that researches such employee owned companies. Today he gave a seminar on his findings thus far. Data shows that ESOPs (Employee stock ownership planned companies) tend to be larger than traditional capitalist companies and are more concetrated in the Midwest. Some notable examples are HyVee, Lifetouch, and Burns & McDonnell. They roughly constitute a mere 1.15% of the employees in the United States.

He wants to compare the productivity of such firms to traditional capitalist firms to see if there is an advantage to one or the other. Traditional theory suggests ESOPs are at a great disadvantage, but data shows that this may not be so. A potential counter-theory is that ESOPs don't have to hire as many "monitors", such as managers and supervisors, because employees of ESOPS monitor themselves because of their stake in the company and they can therefore produce more per worker than traditional capitalist firms.

This research is excellent for the prospects of the growth of ESOPs into the future, which would be progress from a CST perspective.

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