Chapter 12 – Dealing with Union and Employee–Management Issues
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lecture link 12-9
EMPLOYEE STOCK OWNERSHIP PLANS
No matter how hard workers fight for better pay, they will never become as wealthy as the people
who actually own the company. At least that is the theory behind employee stock ownership plans
The fact is, however, that not all ESOPs work as planned. When used correctly, ESOPs can be a
powerful strategy for improving company profitability and increasing employee satisfaction, participa-
tion, and income. But potential problems with ESOPs include (1) lack of employee stock voting rights
within the firm, (2) lack of communication between management and employees, (3) little or no employee
Chapter 12 – Dealing with Union and Employee–Management Issues
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critical
thinking exercises
Name: ___________________________
Date: ___________________________
critical thinking exercise 12-1
ARE UNIONS GOOD OR BAD FOR BUSINESS?
What do managers and workers think about unions? Find out by interviewing one manager of a
business that is organized by a labor union and one union member (this exercise is more interesting if the
manager and union member work for the same company.) Use the following questions as a guideline.
Compare your results with your classmates’ findings.
MANAGER
UNION MEMBER
1. What do you think is good about
management’s relationship with the
union?
1. What do you think is good about the
union’s relationship with manage-
ment?
2. What do you think is bad about the
relationship?
2. What do you think is bad about the
relationship?
3. How are things different in the com-
pany now than before the union was
organized?
3. How are things different in the com-
pany now than before the union was
organized?
Chapter 12 – Dealing with Union and Employee–Management Issues
notes on critical thinking exercise 12-1
This exercise is especially interesting in a town dominated by union workers or one that is having
union difficulties. In any case, it gets students involved with talking with real people about real percep-
tions and takes learning out into the real world. Classroom discussions can only supplement, not replace,
learning on your own.
Name: ___________________________
Date: ___________________________
critical thinking exercise 12-2
UNION NEGOTIATIONS
Let’s get a feel for how employee–management negotiations work. Divide the class into three
groups: managers, union representatives, and observers. The task of the managers and the union repre-
sentatives is to agree on salary rates for the next contract. The task of the observers is to “critique” the
negotiation process used (Did one group make an error? Could a particular confrontation been handled a
better way?).
Chapter 12 – Dealing with Union and Employee–Management Issues
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notes on critical thinking exercise 12-2
Chapter 12 – Dealing with Union and Employee–Management Issues
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Name: ___________________________
Date: ___________________________
critical thinking exercise 12-3
EXECUTIVE PAY WATCH
1. What is the average CEO compensation for the latest year?
2. Which CEO received the largest total compensation package? How much?
3. Who is the highest-paid CEO in the information technology industry? In the financial industry? In
the industrial industry?
4. List the top three executive retirement packages.
5. The text states that the average CEO of a major corporation makes 180 times as much as the av-
erage hourly worker. What is the current ratio of average hourly workers to CEO pay rates?
Chapter 12 – Dealing with Union and Employee–Management Issues
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bonus
cases
bonus case 12–1
DO RIGHT-TO-WORK LAWS HELP STATES?
The year is 1947 and the U.S. Senate and House of Representatives are considering legislation to
deal with an unsettled labor–management situation affecting the U.S. economy. Since the end of World
Organized labor denounced the entire Taft-Hartley Act as a “slave labor” law. However, unions
were particularly troubled with Section 14(b) of the legislation. Section 14(b) enabled states to pass right–
to-work laws that would permit limitations on union shop and union security agreements. Labor “affec-
12–78
1. If given a choice, would you elect to join a labor union or not join? What are the reasons for your
decision?
2. With today’s protections under the law available to workers, do you believe that unions have out-
lived their usefulness?
3. Is your home state or the state in which you now live a right-to-work state? How do you feel
about economic development and growth in your state? If your state is not a right-to-work state,
would you support a right-to-work law if it were put to a popular vote?
notes on discussion questions for bonus case 12-1
1. If given a choice, would you elect to join a labor union or not join? What are the reasons for your
decision?
2. With today’s protections under the law available to workers, do you believe that unions have out-
lived their usefulness?
3. Is your home state or the state in which you now live a right-to-work state? How do you feel
about economic development and growth in your state? If your state is not a right-to-work state,
would you support a right-to-work law if it were put to a popular vote?
Chapter 12 – Dealing with Union and Employee–Management Issues
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bonus case 12-2
PENSION PLANS UNDER ATTACK
The U.S. airline industry has never recovered from 9/11. Since the terrorist attacks, the industry
United argued that it was financially unable to pay these benefits, and the bankruptcy court
agreed. The airline walked away from the pension obligation, the equivalent of taking $267,000 from
each pilot, flight attendant, and mechanic.
The Pension Benefit Guaranty Corporation (PBGC), the government agency created in 1975 to
bail out domestic companies that default on pension obligations, will pick up the tab for United’s pension
While preserving some of United’s pension benefits, the bankruptcy settlement hit workers and
retirees hard. Federal regulations limit the amount of pension payments the PBGC can make to a maxi-
mum of about $45,000 a year. The highest-paid United workers, such as pilots, face pension cuts of up to
Chapter 12 – Dealing with Union and Employee–Management Issues
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discussion questions for bonus case 12-2
1. What ethical and economic issues are raised by this case?
2. Since Social Security will not be fully funded in the future and company pensions may be in
doubt, what should a student do to prepare for retirement? Is this a union–management issue that
is easily resolved?
3. Does the government backing of pension programs create a “moral hazard”? What is a moral
hazard anyhow?
notes on discussion questions for bonus case 12-2
1. What ethical and economic issues are raised by this case?
2. Since Social Security will not be fully funded in the future and company pensions may be in
doubt, what should a student do to prepare for retirement? Is this a union–management issue that
is easily resolved?
3. Does the government backing of pension programs create a “moral hazard” What is a moral
hazard anyhow?
Chapter 12 – Dealing with Union and Employee–Management Issues
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endnotes
i Sources: Monica Davey and Steve Greenhouse, “Angry Demonstrations in Wisconsin as Cuts Loom,” The
New York Times, February 16, 2011; Kris Maher and Melanie Trottman, “Sparring Unions Now Working as
One,” The Wall Street Journal, February 24, 2011.
ii Sources: Matt Miller, “Blowing Up the Union to Save the Union,” Fortune, August 22, 3005; Clayton Nall,
“Gompers’s Ghost and Labor’s New Look,” The Washington Post, September 4, 2005; Lynne Duke, “Love, Labor,
Loss: A Child’s Death Stirred Andrew Stern to Challenge Himself⎯and Unionism,” The Washington Post, January
3, 2006.