by: Kochan, Thomas A.
Source: Rebuilding the Social Contract at Work: Lessons from Leading Cases, Institute for Work and Employment Research, MIT Sloan School of Management
In 1994 United Airlines became the largest employee majority-owned enterprise in the United States, with various groups of employees – most represented by unions – having purchased 55% of its stock in exchange for various concessions. The employees accepted pay cuts and made other concessions, but were also granted representation on the company's board of directors. The case represents the potential of an Employee Stock Ownership Plan (ESOP), but not the full realization of that potential. It shows that an ESOP may be a necessary condition but certainly is not a sufficient condition for substantial changes in labor-management relations leading to improvements in company performance. In light of changes in the company's top leadership, in the leadership of the Air Line Pilots Association (ALPA, one of the major unions involved), and continuing pressures on the already troubled airline industry, it remains unclear whether the company's stock-owning employees, their union representatives, and management will be able to capitalize on the ESOP and board membership structures in order to align their various interests and desired outcomes. If this were to happen, the author argues, we would have to see significant shifts in United's culture, as well as improvements in workplace relations and operations, and, finally, a more interest-based (as opposed to conflictual, zero-sum) approach to bargaining and negotiations. (This case is one of seven that are examined in the article, 'Rebuilding the Social Contract at Work: Lessons from Leading Cases,' by Thomas Kochan (1999). The article can be found in References on this site. The article contains footnotes and references not included in this version of the case.)
Publication Date: 1999-01-01