
          Worker Owned: Some Southern Beginnings
          By Connette, WoodyWoody Connette
          Vol. 4, No. 6, 1982, pp. 11-15
          
          In September 1979, a small group of Windsor, North_Carolina
residents transformed a vacant automobile showroom into a garment cut
and sew operation. They chose a name that desribes exactly what they
are: The Workers' Owned Sewing Company. There were no Chamber of
Commerce ribbon cuttings, no features or accolades in the local papers
and no beaming bankers congratulating themselves on this new business
in the community.
          Three years later, though, WOSCO is thriving, and praise for its
quiet achievement is beginning to trickle in. I was surprised when I
visited WOSCO in September 1982 because the company looks like any
other cut-and-sew operation. A small, front bookkeeping office is
dwarfed by the large sewing room where workers hem pieces of fabric
into clothing. The industrial buzz is nothing like the comforting hum
of a home sewing machine. Thread whips from large cones through the
machine and into the fabric. Over to one side, other workers cut
panels of fabric from large bolts of cloth with electric knives. At
the far end of the room, workers inspect finished clothing before
bagging, tagging and boxing items for shipment.
          Unlike other cut-and-sew operations, however, all who come to work
at WOSCO come with the understanding that they will become
shareholders in the corporation. After three years of continuous
operation, forty workers have bought into the company by purchasing
one share of stock at a cost of one hundred dollars. These workers
have elected a board of directors which in turn has selected Tim
Bazemore to manage the business. Bazemore, a Bertie County native, had
years of experience with another cut-and-sew business and was one of
the leaders in establishing WOSCO. According to him, one of the
principal differences between the worker owned business and any other
business is that "there is a family-like atmosphere here. There is a
feeling for other workers."
          All of the workers meet periodically to discuss the progress of
their business, production and contract problems, and other
matters. Cut-and-sew is a highly competitive industry. When I visited
WOSCO, I was struck by the workers' zeal. Yet there was no sense of
apprehension in their speed and efficiency. They were not working to
please a boss; they were working for themselves. Company profits mean
profits to them personally, and profit is directly tied to their own
productivity.
          WOSCO started on a financial shoestring. At times, Tim Bazemore had
to sell corn, soybeans or hogs from his farm to cover the payroll. No
banks or other commercial lenders were interested. Twin Streams
Educational Center, a Chapel_Hill based organization that provides
assistance to worker owned businesses, loaned WOSCO fifteen thousand
dollars.
          In the beginning, each pay day was viewed as a milestone. In recent
months, the business has been showing a profit after meeting the
payroll and other expenses, so that only $2,700 remains to be paid on
their original Twin Streams loan. Suprisingly, WOSCO's immediate
problems come from being too successful. WOSCO makes blue jeans which
are sold to a company which in turn sells them to K-Mart. The
middleman with which it contracts has apparently heard of WOSCO's
earnings and is attempting to reduce the contract price. So far, the
workers have refused to buckle under to pressure to renegotiate and
may face layoffs. Bazemore and WOSCO Vice-President Lila Dudly regard
this as typical of the problems faced by any cut-and-sew
operation. They remain confident that WOSCO will continue to show
profit and to grow. According to Dudly, "We're going to have to prove
workers' owned to everyone in this area, because we're the first. When
we succeed, there will be more worker owned businesses here than
anything else."
          The individuals who started WOSCO needed work, 

and took matters
into their own hands. But WOSCO workers are not unique. Around the
country, others are coming to realize that to save or preserve their
jobs they too will have to take charge of their futures. Increasingly,
employees are cooperatively taking ownership of plants that are
threatened with closure. In a September 6, 1982 New_York Times
article, the Episcopal Urban Bishops' Coalition said, "We suggest that
the disarray now spreading through economic arrangements in America
today may have its roots in the longstanding practice of workplace
inequality and the lack of dignity through shared ownership." Further,
"We note that where cooperatively owned enterprises have existed in
this country, and elsewhere in the world, productivity has been
high."
          In Weirtown, West_Virginia, workers are negotiating the purchase of
a steel mill from their employer, National Steel Corproation, in the
face of National's plan to close the operation. At stake are the jobs
of approximately 8,800 workers and the economic future of the
community.
          In northeastern South Dakota, the 180 members of Dakota Handcrafts,
Inc. sew earthtone quilts and home furnishings sold in retail stores
throughout the country.
          In Oregon and Washington, several worker owner plywood companies,
ranging in size from eighty to 450 workers, have been in business for
as long as forty years.
          
            Loaves and Zippers
          
          Shortly after midnight, six nights a week, Percy White turns on the
lights at the New Bern Bakery and begins mixing, kneading, rolling and
cutting dough for the goodies that will fill the display counters in
the morning. Around 2 a.m., his wife, Elnora, and other worker,
Ernestine Patrick, arrive. The three of them work steadily, and by 5
a.m. open their doors to the public.
          Fresh doughnuts, twists, long-johns and poorboys are ready when the
customers come in. Cakes are baked to customers' specifications in a
dozen-odd flavors ranging from German chocolate to tutti-frutti. The
Whites and Ms. Patrick remain behind the counter all day. If the work
is slow, they may take turns dozing or minding the bakery while the
others go out for fresh air. At 7 p.m. the bakery closes and its
workers go home for a few hours of rest before starting the routine
again.
          Elnora and Percy White and Ernestine Patrick have been working at
the New Bern Bakery since it opened in December 1981. Why do they work
so hard? As with WOSCO, the bakery belongs to them. They started it
from scratch with little more than hope. Its success will be their
success.
          It may never have occurred to the Whites' and Ms. Patrick to open
their own business had they not been among the five hundred employees
who were abruptly thrown out of work by the Texfi plant in New Bern in
July 1980. None of the Texfi employees received any advance notice of
the plant's closing. Elnora White had worked there for eight
years. "Ernestine called and told me that Texfi was going to close,"
Ms. White recalls, "I said, 'It can't be true. We just left there this
morning.' then the telephone just started ringing. Everyone was
calling each other."
          For the Whites and Ms. Patrick, finding work in New Bern proved
impossible. Local unemployment was already high, and they were
competing with the other 497 Texfi ex-employees for the few available
jobs. All three are middle-aged and black, and they watched as jobs
went to younger and white workers. They realized that they must take
matters into their own hands.
          First, the Whites and Ms. Patrick met with several other former
employees to consider reopening the plant themselves. They had heard
of similar efforts in other parts of the country. A bit of study
quickly showed them that the cost of retooling the plant was too
great. Texfi had anticipated the closing and had done nothing to
modernize production equipment.
          Then, the idea of starting the bakery arose. Percy White had been a
baker in New Jersey and the two women had years of experience cooking
at home. With the assistance of the Center For Community Self-Help, a
Durham, North_Carolina nonprofit organization that offers technical
and financial assistance to emerging worker owned businesses, the
Whites' and Ms. Patrick began a feasibility study. According to
Ms. White, "We went door to door talking to people and businesses."
They finished their study convinced that a bakery would work.
          Next came the long and difficult task of preparing a business plan
and finding the money to lease a budding and purchase equipment and
supplies. Banks and other commercial lenders in New Bern quickly
turned down their loan applications. Again, the Center for Community
Self-Help and Twin Streams Educational Center in Chapel_Hill came to
their assistance in arranging for loans. With this borrowed money and
cash earned through yard sales, the Whites' and Ms. Patrick opened
their baked in December 1981.
          So far, the bakery is breaking even, but to show a real profit it
will need additional equipment and employees. The City of New Bern has
applied for twenty thousand dollars from the North_Carolina Small
Cities Community Development Block Grant Progrm to enable the bakery
to expand. If the state grants the money, the bakery will be able to
begin a marketing campaign to raise customer demand to the bakery's
full potential. When that day comes, perhaps the Whites' and
Ms. Patrick will be able to cut back on their fourteen to nineteen
hour days. For the present, however, none of the three workers
compalins too much about the long hours. "You work for someone else
all your life," explains Ernestine Patrick, "Now you are working for
yourself. This is a foundation."
          "We've got to work together to accomplish anything," Ms. White
adds. And to those who would follow their example, she warns, "Don't
go into it if you are not going to work together."

          A few miles from the WOSCO plant in Windsor, North_Carolina, a
Talon zipper factory, located in Woodland, North_Carolina, closed in
February 1982, throwing over two hundred skilled workers into the
depressed job market of Northhampton County. Eight of these former
employees are now trying to start a worker owned factory called United
Zipper Company. At first, they approached Talon to discuss buying the
closed plant or its equipment. Talon, fearing further competition,
refused to talk. Rather than sell, company agents destroyed the zipper
machinery and let it go for scrap.
          According to one worker, Beulah Sharpe, the cost of building a
plant and purchasing equipment will amount to $700,000. The city of
Murfreesboro has applied for $325,000 from the North_Carolina Small
Cities Community Development Block Grant Program to be used for this
purpose. The balance will come from other lending sources. When the
business begins, by late fall of 1982, there will be ten worker
owners. Their plans project eventual growth to a work force of
thirty-seven.
          "At Talon," says Ms. Sharp, "we were never involved in making
decisions. Now we have to learn how to make decisions for
ourselves. We've made mistakes along the way, but we have learned from
them."
          Another worker, Doris Davis, adds that the learning will be
important for them all in the future. "Instead of having high paid
experts standing around telling us how to do things, we need to know
how to do them ourselves. The more worker owned businesses there are
in the state, the more business there will be to stay. They will not
be as likely to jump and move somewhere else. We would like to set an
example that would give other people courage to try the same
thing."
          
            ESOP's Fable and Workplace Democracy
          
          "Worker ownership" means many things to different people. Many
so-called worker owned businesses are in fact only partially owned by
the employees under the provisions of an employee stock ownership plan
(ESOP), which in most cases is designed by company management to take
advantage of tax benefits. In a typical ESOP, employees who
participate buy company stock through payroll deductions. Depending on
the size of the company, the employees may come to own anything from a
tiny outstanding stock to complete equitable ownership of the
company.
          Workers participating in an ESOP may or may not participate
democratically in the management of the company, depending upon the
particular provisions of the ESOP. Rarely do all workers own an equal
share of the business under ESOP provisions. Employers like ESOPs
because they have significant tax advantages. They have learned that
employees are more productive when they own a piece of the action. The
Washington-based National Center for Employee Ownership is the leading
organization promoting worker ownership through ESOPs.
          Every fable contains a bittersweet lesson, and ESOP is no
exception. While ESOPs may be applauded for allowing employees the
opportunity to purchase equitable ownership in the companies that
employ them, much of the gain is illusory. One problem is that many
companies tie employee ownership with a vesting scheme based on
employee tenure. Thus, the employee who stays with the company the
longest ends up with the largest share of the ownership. In a low
paying, unskilled company with high employee turnover, the company
management stays with the company the longest and ends up owning the
stock.
          Another problem with ESOPs is the emphasis they place on property
ownership of company stock, with no real concern for democratic
management of the business. Under an ESOP, stock is held in a trust,
and through various schemes upper management can retain control over
the voting_rights that go along with the stock. For many worker
owners, management is vastly more important than ownership. Thus, many
worker owners and experts in the field question ESOPs as an option for
worker ownership.
          Among those who question the value of ESOPs are individuals like
Steve Dawson, executive director of the Industrial Cooperative
Association in Cambridge, Massachusetts, who asserts that effective
employee ownership must involve more than having employees' names on
the rolls of stockholders. For these individuals, workplace
democracy--the individual worker's right to manage the workplace and
share in the benefits of management--is paramount. For them, workplace
democracy has little to do with property rights. Since democratic
management rather than ownership is the key, the business becomes
something of a vessel for the workers' collective labor. Wages and job
quality are the principal rewards. While the business itself may be a
valuable asset, it is regarded as a legacy to be held intact for
themselves and for future generations of workers.
          In the best definition that I can offer, a worker owned business is
one in which all workers own some share in the business, with each
worker owner having one vote in the basic management of the business
affairs and workplace.
          
          Why worker ownership? Worker owned businesses can save existing
jobs that are jeopardized by plant closings and relocations and can
also create new jobs. This was one of the driving forces behind all
three worker owned business ventures in eastern North_Carolina. None

of the eight individuals involved in United Zipper, for instance, has
found a job in the seven months since Talon closed its doors.
          Unemployment is especially high among minorities, the very young,
and the older individuals. By September 1982, seven months after
J.P. Stevens closed its Rock Hill, South_Carolina plant, a Charlotte
Observer survey showed that only thirty-seven percent of the former
employees had found full time jobs. Only twenty -seven percent of the
women employees had found jobs. The average age of those who found
work was forty-one, and none contacted in the survey was below the age
of twenty-six. The average age of those without jobs was
forty-five.
          Worker owned businesses can also operate more profitably than
traditional corporations since a small portion of the gross revenue of
a worker owned business is subject to taxation on the corporate
level. Further, studies have shown that worker owners are generally
far more productive than their counterparts in other
businesses. Engineers who have timed WOSCO workers found that they
work at greater speed than employees in other cut-and-sew
operations.
          A worker owned business is often willing to settle for a lower
profit margin. Large corporations or conglomerates frequently cast off
plants that are not as profitable as their other operations. They show
little regard for the livelihood of those who may have served in the
local plant for their etire working careers. To explain such a plant
closing, a GAP Corporation vice-president once said, "We are a big
company and this is a small division that we acquired twelve years ago
in a merger."
          For the local employees of such a plant, operating the business as
worker owners may be profitable enough to preserve their jobs and pay
their wages. If they own the business themselves, there is no need to
worry about earning excess profits to distribute to shareholders
living outside the community with no real interest in the business. If
they are able to show a profit it goes into their own pockets as
salary dividends or stock equity appreciation.
          Local business leaders and politicians have generally been
skeptical or even hostile at the first suggestion of the creation of a
worker owned business in their communities. Upon reflection, however,
they have generally realized the positive effect that the business
with its jobs will have in their communities. In the case of all three
worker owned ventures I have described, local business and civic
officials, in recent days, have been quick to offer suport and
assistance. By and large, however, commercial lenders remain reluctant
to extend credit because of their lack of experience in lending to
anything but traditional businesses.
          Among the greatest advantages of worker owned business are those
which cannot be measured on a balance sheet. Worker owners must learn
how to work together, how the entire business operates, how their
individual responsibilities fit into the total business and how their
business fits into the total economy. The worker is at once a student
and a teacher. Taking charge of their work lives also better equips
workers to take control of their personal lives and to participate in
their communities. All of the worker owners I interviewed were proud
of their struggles to make the businesses work and of how much they
have learned in the process.
          
            From A&P to 0&0
          
          Despite the attractions, all is not rosy in the world of worker
ownership. Problems abound. The success stories can be countered with
stories of failures. In Lincolnton, North_Carolina, 210 textile
workers lost their jobs and three weeks pay when their former employer
quietly filed for bankruptcy and closed the plant in February 1981. I
lived less than a block from that plant at that time and watched with
anguish as the employees struggled through seven months of exhausting
work trying to reopen the plant as a worker owned business. Obtaining
financing, developing a business plan, negotiating with purchasers and
suppliers and planning for democratic plant management was simply more
than the core group of ten workers could endure. Today, the plant
stands idle, and many of the former employees remain jobless.
          One of the major problems facing worker owned business ventures is
financing. Traditional lending sources have been extremely reluctant
to extend credit. In partial recognition of this problem, Congress
created the National Consumer Cooperative Bank (NCCB) to offer loans
and loan guarantees to worker owned businesses and other
cooperatives. To date, however, most of the credit extended by the
NCCB has gone to well established consumer and producer coops rather
than to emerging worker owned businesses. In addition, the turnaround
time on processing loan applications, together with personal
guarantees and collateral requirements, have frustrated worker
owners. NCCB has proved virtually useless in the worker ownership'
movement.
          In North_Carolina, a handful of organizations have consciously
developed a technical assistance system to support worker owned
businesses. Twin Streams Educational Center assists worker owners in
learning to make cooperative management decisions. Twin Streams
director Wes Hare says, "We are committed to offering close, active
educational support to workers as they learn to fill new business
roles. We work with them to learn decision making, board of director
functions, officer responsibilities, and other questions of
policy--where decisions are made and by whom. We also conduct
residential workshops of workers and technicians. We are constantly
supporting education based on the ideas at hand, built on a foundation
of political and community action, with concern for worker
empowerment."
          Another organization, the Center for Community Self-Help in Durham,
offers nuts and bolts assistance with feasibility studies, business
plans, management, production, and marketing plans. The Center also
offers legal assistance with incorporation and other
matters. Recently, it has been instrumental in establishing the
Corporation for Democratic Business to extend loans to worker owned
businesses and in establishing a credit union. According to the
Center's director, Martin Eakes, response to the emerging credit union
has been very promising, suggesting that it may well become one of the
best available sources of financing for worker owner businesses.
          Church organizations have been among the most promising funding
sources. WOSCO, for example, 

received a sixty-thousand dollar loan
from the United Presbyterian Church at below market interest
rates. The Washington based Catholic Campaign for Human Development
has also shown interest in financing worker owned businesses and had
agreed to extend credit to the Lincolnton venture.
          Worker ownership is also suffering an identity crisis. In the
public mind, it is frequently associated with union concessions in
failing industries. Around the country, savvy business managers are
offering illusory ESOPs and other employee stock options in union
contract negotiations in exchange for wage and benefit
concessions. When labor refuses these offers, management criticizes
them for wanting all of the benefits with none of the burdens that
come with ownership. Although touted as employee ownership, these
schemes are generally a far cry from the type of worker ownership
described in this article. In Clark, New Jersey, the employees in a GM
plant were given ESOP participation in exchange for a twenty-five
percent cut in wages. While the employees acceptes this as part of a
package, it is not the "worker owned business" that it has been
trumped up to be.
          In a similar vein, worker ownership has also been associated with
traditional businesses offering ESOPs or other profit-sharing plans
and token participation in workplace management. "Worker ownership"
has been used to describe a confusing array of stock participation
schemes. In a recent article discussing this identity problem,
Industrial Cooperative Association Director Steve Dawson speculated
that unless worker ownership can be distinguished from other business
structures in the public mind, it "will become just another high-risk
profit sharing scheme. Just one more shell in corporate America's
productivity game."
          To further complicate this identity problem, worker ownership has
frequently been shunned by unions who could offer alternative image of
worker ownership to that posed by corporate managers. While twenty
percent of America's union members belong to internationals that have
taken affirmative positions on workplace democracy and employee
ownership, many of the remaining eighty percent belong to unions that
are hostile to the idea of worker-ownership. The United Zipper
workers, for example, were all members of a local ILGWU while employed
at Talon. When Talon announced its plans to close the plant, the
national union officers offered no assistance when they were
approached by the workers, all of whom were leaders of the union
local, with their proposals to open a new plant.
          In the Philadelphia area, the United Food and Commercial Workers
Union has been instrumental in establishing worker owned supermarkets
in the wake of many supermarket closings in recent years. According to
Wendell Young, President of UFCW Local 1357, his union began
negotiations with A&P management in April 1982 for the lease of
five former A&P stores to be opened as worker owner
supermarkets. On October 13, 1982 the first worker owned retail
supermarket in the country opened under his union's leadership in
Philadelphia. The store, known as "O&O"--short for Worker Owned
and Operated--is completely owned by twenty-four full time worker
owners who are also UFCW members. These worker owners have hired a
professional manager who has no ownership interest in the
business. The union is the bargaining agent between this manager and
the worker owners. According to Mr. Young, "Our UFCW local supports
the concept of worker ownership. Based on our experience here in
Philadelphia and elsewhere, we believe that worker ownership is a way
of saving jobs for UFCW members."
          
            Seeds of Hope
          
          The worker owned businesses that I have seen are all relatively
small. In every case, the workers have struggled against desperate
odds to get started. In an economy that measures success by size--the
size of the labor force, the value of corporate assets, the margin of
profit--these businesses may appear insignificant. I live in that
economy, and I have become adept at using its yardsticks for measuring
success. Yet in these worker owned businesses, I see hope. They are
rooted in the community as no other business can be. By not having to
satisfy external shareholders or the growth expectations of a parent
corporation somewhere else, they can survive wide fluctuations in the
economy. They provide decent, stable jobs and give workers the chance
to manage their own affairs. Around the country, workers like Elnora
and Percy White, and small towns like Woodland and Windsor, are being
ravaged by the drastic changes that we are seeing in the industrial
production sector of the economy. There are welcome seeds of hope in
these worker owned businesses.
          
            Woody Connette is managing attorney at Legal Services of
Southern Piedmont, Inc., in Concord, North_Carolina.
          
        
