Business: Trouble in Workers' Paradises

Trouble in Workers' Paradises Some cases of employee capitalism turn into ESOP fables

South Bend Lathe Inc. in Indiana was until recently the very model of a modern worker-owned corporation. Five years ago, the 74-year-old machine-tool maker was saved from closing by its 500 employees, who bought shares in the firm through an ESOP (Employee Stock Ownership Plan). Money for the stock purchases was provided by a loan funded by the Federal Government. With a team of new managers, the company prospered under its new worker-owners. Productivity increased, and sales nearly doubled, to $24 million. Now, however, a strike has...

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