Critics of employee ownership have argued that the idea has a fundamental flaw: You're putting workers in charge of their own paychecks. "Somebody's crazy. It can't work," Lee Iacocca, the former Chrysler chairman, reportedly said about United's deal in 1994. "What do you think will happen when it's a choice between employee benefits and capital investment?"

Even though workers in an employee-owned company are also technically "owners," critics like Iacocca suggest that they won't act like owners. Employees will favor immediate pay increases over investments that will, in the long term, pay off even more. The critics aren't wrong; some of Iacocca's worries do seem to have played out at United. But the key to making sure that doesn't happen at other employee-owned firms, and the key to having ESOPs transform society, experts say, is changing the "culture" of an employee-owned company: disabusing workers of the notion they're "wage slaves" and persuading them to value the company.

In November, when it still looked possible for United to avoid bankruptcy, the company asked its employees to take deep wage cuts in order to save the firm. Most of the workers complied, but the company's 13,000 mechanics balked at their proposed share of the pay cuts -- about $700 million over five years. The mechanics said that they couldn't agree to the wage cuts because they were concerned with what they called "work-life" issues at the company -- for example, they were upset about United's refusal to let them choose which vacation days they were required to take unpaid.

Some mechanics seemed untroubled by the idea that United might end up bankrupt. "The general feeling among mechanics is, 'If we can't have it, then greedy executives can't have it either,'" wrote Jennifer Salazar Biddle, a United mechanic, in an Op-Ed on the Socialist Worker's Web site. "Everyone I know is saying, 'Full Pay to the Last Day!'"

Considering that a typical mechanic had paid about $80,000 in wages to buy a slice of United, the mechanics -- who eventually backed down, though not in time to save the company -- could be accused of acting irrationally. Their desire to stick it to "greedy executives" was so consuming that they seemed to forget that, in pushing for bankruptcy, they were also sticking it to themselves.

That sort of irrationality has been a hallmark of United's ESOP, and it hasn't always been confined to the employee side of the bargaining table, experts say. United's management has continually blamed workers for the airline's high cost-structure, and its dealings with workers have always been frosty. "Folks who are more toward the left like to point the finger at management and say they screwed up," says J. Michael Keeling, president of the ESOP Association. "Then people whose values are more to the right, they blame labor and they blame the unions and what the pilots did with that stupid flight slowdown in the summer of 2000.

But you can't blame either the management or the workers, says Keeling. Each side was simply playing its part in the adversarial game that has always characterized the relationship between workers at a company and the owners, especially at large, heavily unionized companies like United.

"If you really want people to behave like owners," says Charles O'Reilly, a professor of human resources and organizational behavior at Stanford's Graduate School of Business, "you have to make sure they have psychological ownership, not just financial ownership." What O'Reilly means by "psychological ownership" is straightforward: People have to care about the fate of the company. What's surprising is that research has shown that psychological ownership doesn't necessarily coincide with one's financial stake -- you can own a lot of stock in a company, but you might still hate everything about the place and try to enrich yourself in the short term even if hurts the company, and you, in the long term.

While it's easy for firms to design ways to hand over financial ownership to employees, there isn't a standard recipe for giving workers psychological ownership. But some things can help predict how well workers will take to their new role, experts say. One is the size of the company: Workers in a small company tend to have an easier time feeling as if they own the place than those in a large company. Most employee-owned companies are not publicly traded, says Rosen, and that helps as well. When workers feel as if the management is more responsive to labor than to a horde of anonymous shareholders, they're bound to feel more loyalty to the firm.

But perhaps the most important factor is the historic relationship between labor and management at the firm. "I remember when I heard of the United plan," says Rosen. "I said, Oh God, why do we have to have United as the company that everyone thinks of when they think of an employee-owned company?" That's because United had a dismal record of labor relations. "We knew that the best environment for employee ownership is one in which -- like Southwest -- the company says employees come first, customers second, and shareholders third," Rosen says.

Rosen adds: "Every company in America says that 'people are our most important asset,' but the tragedy that United illustrates is that that's not true. What we've seen is that when you treat your employees with dignity and respect, you get thousands of people in a big company sharing ideas and information about how you can do things better. And there are only a handful of companies who realize that the people who work for you are the most important asset."

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