Employee Ownership

June 17, 1983

Report Outline
Worker Buy-Out Movement
Workplace Democratization
Future Prospects for Esops
Special Focus

Worker Buy-Out Movement

Interest Spurred by Weirton Steel Action

Last year, national steel Corp., the fourth largest steelmaker in the United States, announced its intention to gradually pull out of its Weirton, W.Va., plant. Though the plant was “marginally profitable,” company officials said it was “not economically feasible” to modernize the 60-year-old facility, which produces tin plate for cans and sheet metal for automobiles. Like other steel manufacturers, National was finding it increasingly difficult to compete with cheaper imports from Japan and Europe and was diversifying into other sectors of the economy. On March 2, 1982, company executives delivered an ultimatum to Weirton's 7,000 employees: either buy the plant or face eventual layoffs.

For this West Virgina community of 26,000 inhabitants, most of whose livelihoods depended directly or indirectly on the plant, the answer was clear. Ten days later, the workers accepted National's offer to buy the plant, pending a costly feasibility study to determine whether it was actually worth saving and what the buy-out would cost them. According to the study's findings, announced in August 1982, the modernization measures necessary to make Weirton competitive would run $1 billion, but could be effective if employees accepted a 32 percent cut in wages and benefits.

In March 1983, representatives of National Steel and Weirton employees agreed on the terms of sale, which were then submitted to the workers for approval. If the employees vote, as expected, in favor of the buy-out, the plant will become the nation's largest company that is 100 percent employee owned. Already, all the publicity surrounding the deal has given new impetus to the growing movement of worker buyouts made possible by Employee Stock Ownership Plans (ESOPs). The ESOP concept was developed in the 1950s by San Francisco attorney and economist Louis Kelso, who has written many books and articles on the subject. But employee ownership did not really take off until the early 1970s, when Congress first authorized the ESOP as a type of employee benefit plan under the Employee Retirement Income Security Act (ERISA) of 1974.

ISSUE TRACKER for Related Reports
Investment and the Stock Market
Unions and Labor-Management Relations