The Workers' Stake in Capitalism

EMPLOYEE STOCKHOLDERS

DURING the greatest economic boom of all time, a new group of stockholders is sharing in the fat corporate profits. They are the U.S. workers who make the goods. Since World War II, plans to help employees buy stock have spread so fast that some 300 companies now have programs involving 2,000,000 salaried and production-line workers. This week General Motors announced the results of a poll on its plan for 112,000 salaried employees. Four out of every five eligible workers decided to invest up to 10% of their pay in G.M.'s future, and the corporation started making deductions from paychecks. Ford will bring out a similar plan to help employees buy Ford stock (if and when it is put on sale). Du Pont, which started a stock plan last month, reports that nearly 70,000 (out of 87,000) eligible workers have signed up. But despite their increasing popularity, stock-buying programs are also the center of a growing argument on whether they are good for companies and their workers.

Worker stock programs are not a new idea, and for some businessmen their past record is against them. In 1929 many of the biggest corporations --U.S. Steel, Standard Oil Co. of Indiana, A.T. & T., Procter & Gamble--some 200 in all, had stock programs. But when the Depression hit, all but a handful ran into trouble and were dropped. Not only did the workers, like almost everyone else, sell out at large losses, but the plans themselves were faulty. Most called for stock to be bought at a fixed price on a fixed day and paid off in rigidly fixed installments. Thus, a worker might buy a stock valued at $200, only to have it plummet to $20 a share while he was still paying off at the original price. In many cases, the only way for a worker to escape was to quit his job.

Today, however, U.S. industry is doing its best to make sure that history does not repeat itself. Apart from the basic good health of the entire economy, most modern stock-buying programs contain safeguards to protect employees. One device is for the company to help its employees buy stock, either through discounts or straight cash contributions. Thus, if the stock drops, the loss is spread between company and worker. A.T. & T., for example, sells its stock (currently $180) at a $20 discount. G.M. buys 50-c- worth of stock for a worker for each $1 he puts into savings (of which one-half is invested in Government bonds and one-half in G.M. stock), and also promises to make up the difference if the price drops. Du Pont gives a 25% stock bonus for each $1 the worker invests in savings bonds. In the oil industry, Sun Oil, Gulf, Standard of California. Standard (N.J.), Pure Oil and Cities Service all add to their workers' kitty with as much as 50% worth of stock or bonds. Other companies, while helping their workers buy stock, also do their best to educate them about possible dangers. Sample quote from Inland Steel's booklet: "Buying stocks involves risk . . . Before you buy, you should give consideration to a family insurance plan . . . And it's possible you should begin a home-financing program before investing in stocks."

If the stock drops in value, many companies provide truck-sized loophole's to let workers escape from their payments. Inland Steel, Delta C & S Air Lines, Atlanta's Citizens' & Southern National Bank and Dow Chemical all hold the stock until the final payment is made; then if a worker decides that he does not want the stock, his money is returned.

To many businessmen--even those who champion the idea of worker stockholders--too much protection in stock plans is a poor idea. They feel that workers, like everyone else, should take the normal risks involved in stock buying. Over and above that, many others question the wisdom of a worker putting all his savings in one basket by buying only his own company's stock, argue that he would be better off by diversifying his investments. Some companies fear that organized labor may try to exert too much influence on company policy if union members own large amounts of stock. Another big worry is that unions will take over a program, make it a part of their wage bargaining. In a recent case involving California's Richfield Oil Corp., the NLRB ruled that a company-aided stock-buying program was in effect a boost in wages and thus came under collective-bargaining rules. The case is being appealed in the Federal Court, but many businessmen are skittish about starting programs under such conditions.

Despite the objections, employee stock-purchase plans seem here to stay, and likely to spread. They not only help management broaden the base of company ownership, but also help establish a close relationship between management and employees. Stock-buying workers develop a greater incentive to save, a bigger interest in producing more, and a chance to get a permanent stake in U.S. capitalism.

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