United is a Poor Model for Employee Ownership

Author: Flanigan, James
Source: Los Angeles Times
Year: 2002
Company Name: United Airlines

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Abstract:

It would be easy to look at what’s happening at United Airlines, now on the brink of bankruptcy, and conclude that the concept of employee ownership in America has fallen into a tailspin.

Eight years ago, after all, workers at United agreed to give up $700 million in wage cuts and work-rule concessions. That, in turn, afforded them the chance to buy out many of the airline’s executives and public shareholders and to form an employee stock ownership plan, or ESOP.

The idea at the time was that the employees would give up short-term benefits for long-term gains.

But for many reasons, the gains envisioned by the union leaders who led the ESOP drive -- a greater voice in parent company UAL Corp.’s policies and a direct stake in its future profitability -- have not materialized. After a burst of heightened productivity, enthusiasm for the ownership plan waned quickly in the mid-1990s as union members replaced their leaders and new managers took over for retiring executives.



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