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Worker Ownership and Co-op Management at Algoma Steel
© 2001 GEO, P.O. Box 115, Riverdale, MD 20738-0115
Worker Ownership and Co-op Management at Algoma Steel

By Frank Lindenfeld

Algoma Steel in Sault St. Marie is the largest worker buyout in Canada. In 1992, in the wake of a bitter strike, its corporate owners planned to shut it down. With some financial aid from government and leadership from the United Steel Workers of America (USWA), the workers bought the steel complex. It was a ˝forced choice.ţ [The term is used by Varano to describe a similar buyout of Weirton Steel. See Charles S. Varano, 1999. Forced Choices (Albany: State University of NY Press)]. The alternatives were to close the plant or for the 7,000 employees to buy it. The company has survived, but is still in trouble. Like the rest of the North American steel industry, the ˝New Algomaţ has been hurt by globalizationä˝dumpingţ steel by foreign corporations that can sell steel at low cost because they pay their workers less and/or benefit from government subsidies.

At first, Algoma employees owned a majority of the shares. Later, to raise funds for modernization, the company sold shares on the stock market, reducing the employee ownership to 24%. The original agreement set up a Joint Steering Committee and gave union representatives five seats on the Board. The firm is still guided by the co-management arrangement which gives the union considerable power. Half the committee is drawn from the two union locals representing hourly and salaried workers, half from management. There is also a strong employee participation program that has involved many workers in training and in ongoing shopfloor committees. Algoma invested over $500 million CAN to build a modern sheet steel mill. Each year it has trimmed the workforce to cut costs; the latest contract provides for further cuts, so that by 2002 there will be only 3,650 hourly and salaried employees.

Algoma demonstrates some of the weaknesses of employee ownership, even when coupled with genuine worker participation in decision-making. The workers have ˝put all their eggs in one basket.ţ If the company were to fail, they would lose not only their jobs but the equity represented in their stock as well. A better model might be based on shares in a diversified mutual investment fund including a number of employee-owned firms. A second weakness of employee ownership is that it may promote enterprise consciousness rather than solidarity with other workers, consumers, etc. Enterprise consciousness can be mitigated by a strong union like the USWA which emphasizes labor solidarity. It could also be countered by joining with other employee-owned firms to form local and regional networks as at Mondragon.

These notes are based on Frank═s visit to Algoma Steel in spring, 1999. A much lengthier version of this paper is available from GEO for $3.

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©2001 GEO, P.O. Box 115, Riverdale, MD 20738-0115