Own It! The Kelso Way

SYNOPSIS

Sixty years ago, California business attorney Louis Kelso proposed a solution to the income divide whose destabilizing effect he had observed since the Great Depression: "Labor is the source of subsistence, Capital is the source of affluence. My idea is to make everyone a capitalist and therefore, financially secure."

With Louisiana Senator Russell Long's support, Kelso’s Employee Stock Ownership Plan (ESOP) became an employee benefit in 1974, enabling employees at every salary level to earn company stock toward their retirement. ESOPs were widely embraced in the 1980s when globalization cut into union-negotiated wages. But what remains unappreciated is how Kelso’s Plan continued to enrich generations of workers, especially in privately held companies. Today with labor threatened by AI and industry consolidation, understanding the potential of the ESOP is more vital than ever.

“Own It!” is very fortunate to have the authenticating voices of people intimately connected with Louis Kelso and ESOP history. Lawyers John Menke and Norman Kurland worked alongside Kelso in the early years. Political scientist Corey Rosen and sociologist Joseph Blasi were House and Senate staffers working on ESOP legislation. Later, Blasi was joined by economist Douglas Kruse in studying employee-owned companies. Social psychologist Chris Mackin was one of the first to offer training on ESOP governance.

That said, the most engaging descriptions of how an ESOP works comes from employee-owners themselves:

“every year you get a certain block of stock that goes into your account, and that account will stay there until you retire.”

“we look at the financial side of it, our investment accounts...the original owners walked out millionaires. You can, too, if you have discipline”

“I like that open book policy...if you’re gonna try to persuade somebody that they are a partial owner of the company...you doggone better, well, give them all the information...

“everyone is here to help. They understand that if you’re not at your best, the company’s not at its best.”

“we can change what we don’t like about the place”

“...it’s a real plus for people who are going to stay for a long while.
”
We chose to document employee ownership in the Ohio-West Virginia region of America’s "Rust Belt" because manufacturing had been the foundation of America’s prosperity, and Weirton Steel made national headlines in 1984 as the first and largest 100% employee-owned company. Smaller manufacturers and fabricators have the longest history of ESOP ownership in the region, so through Voto Sales in Steubenville and Fastener Industries in Cleveland, we are able to observe the evolution of Kelso’s plan past the demise of Weirton Steel’s ESOP.

Traditional images of corporate ownership are in stark contrast with the 2024 shareholders meeting at Fastener Industries where only the Board members wear suits. Many shareholders look like they came off the shop floor and are going back there after the post-meeting lunch. The questions they raise give us opportunities to segue to similar questions at Voto where we plan to film the Board at work. The timeline is loosely structured around current concerns of the three companies—Fastener Industries is updating some equipment and liquidating an unprofitable subsidiary, Voto has to buy back a large number of shares from retiring employees, and USW representatives of the 600 laid off Weirton workers look for a silver lining while analyzing for us why their ESOP had to end.

Memories supported by archival material connect us to the parallel timelines of the three companies’ past. In the early 1940s, as part of the war effort, Weirton Steel produced torpedoes, Voto Sales was customizing cables for open pit coal mines and Fastener Industries (then called Ohio Nut & Bolt) was providing weld screws for American rockets. During post-War expansion, Weirton contributed to employee retirement while Voto and Ohio Nut & Bolt started profit-sharing plans. The difference? If they needed capital, Weirton used bank credit, the family-founded Voto and Ohio Nut & Bolt had to offer stock for purchase to upper management. In 1980, the owner of Ohio Nut and Bolt was ready to retire and sell the company. According to the current President and the CEO of the company, the then CFO had been inspired by Kelso and turned their profit-sharing plan into an ESOP plan. Something similar happened at Voto the year after, but by then there were law firms specializing in ESOP transactions.

Weirton Steel’s ESOP, on the other hand, was a fire sale well-documented in the media. The parent company was moving out of manufacturing. Given that Weirton’s union leadership negotiated the purchase and a majority of its members voted in favor, the role of the union is a subplot in this story and Union President Mark Glyptis a key player. Equal representation of the union on the Board was a requirement of Kelso’s ESOP, but this was not part of Weirton Steel’s corporate culture. Glyptis tells of the times he had to remind the Board he “represented the majority of the shareholders.” On their part, union members had to be more open to multitasking and take responsibility for the financial health of the company.

We hear a variety of reasons why the Weirton ESOP didn’t last. New York financiers appointed a CEO who wanted to upgrade too quickly. This involved computerization for which they hired an outside contractor who “didn’t know steel.” Cost overruns compounded by a fire in 1994 led to the employee-owners voting to sell almost half the shares on Wall Street. The cost overruns continued but this time the employee-owners, afraid to lose their company, voted against any further sale. In 2002, only a tin mill by then, Weirton declared bankruptcy.

Doug Kruse notes that economists in Kelso’s time thought of the “company” as a black box. They studied the input and output but not what was going on inside. In the decades since, they have recognized there is such a thing as “ownership culture” which is different from corporate culture. “Own It!” suggests that culture is not very different from what Americans have always valued. Over and over we heard, “We are like family,” and met employees who were second and third generation or friends of friends. “In my view,” one said, “nepotism is a good word” and went on to explain how a child working alongside the father would not want to disappoint him. This sense of community helps them weather economic downturns. Employees in both Voto and Fastener take voluntary cuts in pay so that no one has to be laid off.
At two of our three locations we have filmed our participants at work to illustrate a lot of the culture they talk about. Especially interesting is the interaction between generations where the “knowledge” of the retirees is valued and everyone worries about how to pass it on. Similarly, younger employees are encouraged to try different jobs and find where they fit. We see innovation with new raw material and collective decision-making in the purchase of new equipment. Work-life balance is a priority and everyone has a different opinion about serving on the Board.

Observing the success of two very different ESOPs in two small companies, we decided to look for an update to ESOP legislation in the Small Business Committees of Congress. Congresswoman Nydia Velazquez had just shepherded the Main Street Employee Ownership Act through as part of the Defense Bill in 2018. She talked about the difficulty ESOPs and other employee-owned companies face in getting loans from local banks. Thanks to C-SPAN, we also have video of Congressional Hearings on ESOP legislation for small business, but those have to be fully integrated into the “Own It!” narrative.

With donations received, we filmed interviews in 2016-17. After the pandemic lock-down, production resumed in Cleveland in 2024 and continued the following year in the Steubenville-Weirton region. Like past Hartfilms projects, “Own It!” was designed as an hour-long documentary for PBS broadcast, and two stations--PBS Western Reserve, OH and West Virginia Public TV--wrote letters of intent to distribute. Now with federal funding withdrawn from both PBS and Humanities projects, we have time to edit the “Own It!” footage into a compelling narrative and determine what we need to film during our final production trip. The rough edit will also be used to pursue new distribution channels, draw up an accurate post-production/finishing budget, and explore crowdfunding opportunities in order to make the documentary available by 2027.

Director Statement

Having moved from a socialist democracy to a capitalist one, I asked the same question that Louis Kelso asked—can all citizens have a meaningful stake in a society deeply divided by a wealth gap? Kelso’s contrarian solution, dismissed by economists and challenged by labor unions, but embraced by business owners, activists, legislators, Democrat and Republican, suggested a story worth following. I am deeply grateful to the individuals and organizations that shared, on camera, their experiences and insights. They present “ownership” at its best.

- Jayasri (Joyce) Hart

Supporter Statement

As an educator, I believe "Own It! Louis Kelso's Macroeconomic Fix" will contribute to the public's much-needed understanding of income, wealth inequality, work and the workplace.

In my years of working on writing legislation followed by writing legislative history, I have come to appreciate the financing techniques of Louis Kelso... (which) have brought capital investments within reach of many millions of workers... Many employee-owners, while looking forward to ESOP-funded retirement, don't appreciate the wider socioeconomic implications for addressing national wealth inequality and a just society. And most importantly, those in or entering the workforce don't realize the sea-change in labor-management relations that many businesses have undergone as a result of employee ownership...

I have been in contact with the filmmaker, Jayasri (Joyce) Hart since the project's inception. I have been deeply impressed by her research skills and dedication. I have reviewed two film samples and I find them... extremely capable of drawing people into the movie.

As one of its key Academic Advisors, I am committed to guiding the project to its completion. I commend Women Make Movies for the fundraising support given to "Own It!" and wish you great success.

- Joseph R Blasi, Distinguished Professor
School of Management & Labor Relations, Rutgers University:

ABOUT FILMMAKER(S)

Producer/Director/Editor Jayasri (Joyce) Hart

Jayasri (Joyce) Hart worked for the BBC World Service and India’s educational radio and TV networks before earning an MFA in Cinema/TV from the University of Southern California. Now based in Los Angeles, she produces, directs and edits documentaries. "Roots in the Sand," (the story of Southern California’s Punjabi-Mexican-American community) screened and won awards in the US, Canada, India and Australia, and is distributed by the Asian American Consortium of PBS. It was recently included in the American Archive of Public Broadcasting at the Library of Congress. "Sisters of Selma" (the African American campaign for full voting rights as seen through the eyes of the Catholic nuns who took part) was largely funded by the Independent TV Service (a PBS initiative) through Alabama Public TV and aired in 24 major PBS markets. It was nominated for Southeast Regional Emmy awards in the categories of Best Documentary and Best Original Music. The project is archived by the Carondelet Sisters of St. Joseph in St. Louis.

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