Fulfilled dream about better capitalism [INSPIRATIONAL POLES]

09.06.2018

Is there a third way between competition-squeezing, socialist state equity and the bloodthirsty capitalists exploiting their workers? Few people know that at the beginning of the 20th century a Polish chemist and entrepreneur Marian Wieleżyński, gave the affirmative and practical answer to this question.  He built an innovative company that empowered his employees by making them the co-owners of the company. While creating it, he cooperated with the future president of Poland, and the success of the employee share ownership model has inspired people like Pius XI and Charles de Gaulle.

Marian Wieleżyński was born on February 17, 1878, in Zastawna near Czerniowice. He was the son of Walerian Wieleżyński and Natalia Knapp. When his father died in a railway accident in 1882, his mother moved to her family home in Olomouc, Moravia, where Marian started his education. His interest in science drew the attention of the local rabbi, a post-uprising emigrant from the area of Nieśwież. He let the boy use his library, where the boy found the encyclical “Rerum Novarum” and subsequently learnt about the foundations of the Christian views on socialism and capitalism.

Moreover, thanks to visits to the home of the Rabbi, Marian underwent the process of polonisation – at home, he spoke German. The rabbi introduced him to the works of Polish literature and learned to speak and write in Polish fluently.

After his grandfather’s death, he moved with his mother back to Czerniowice, wherein 1896 he graduated from high school. A year later, he began his education at the Lwów Polytechnic. He enrolled at the Faculty of Chemistry. His brother Aleksander joined the Department of Roads and Bridges. The walls of the Lwów university were not hospitable for the brothers. They were quickly expelled for political activity. They continued their education at the University of Vienna that Marian graduated from with honours in 1901.

The period of study in Lwów, while short, was extremely fruitful. Back then an incident occurred that has contributed to the future development of the employee share ownership concept. Sugar factory administrator, Count Branicki was accidentally hit by one of the employees during the inspection of the sugar factory ready to commence operations. In a fury, the count returned his grudge and gave the worker an immediate order to leave the building. “For me, everyone’s goal should be to work for themselves. If a farm worker can dream of getting his piece of land and managing it according to his preference, a factory worker can not dream about owning the miracles of modern technology, but he can and should think about becoming a co-owner of the enterprise in which he works. When I started my work in a chosen profession, after graduation, I decided to do what I can to change the relationship of work to capital, that is, the fundamental factors of production – currently fighting – into conscious cooperation”- the chemist has supposedly shared such thought his relatives.

An idea brought to life

Marian started working in 1901 at ‘Galicja’ refinery in Drohobycz, where he developed a method for obtaining white paraffin. He did not like the director’s behaviour, so he left the job and started his own business. His first venture was the Experimental Station – a laboratory operating in Drohobycz, where various varieties of oil and its derivatives from the Borysław Basin were studied. At that time, Wieleżyński showed an interest in environmental protection, what was unusual at that time. Back then, the ways of extracting oil significantly contributed to its degradation. The extracted gas was being utilised by burning it in the so-called flares.

Nobody apart from Wieleżyński could see the potential of natural gas. He described the practice of gas burning as a crime, accusing oil workers of wasting valuable raw materials. He was not even listened to when he presented a bottle with a transparent liquid resulting from the condensation of heavier fractions, the “wet natural gas”. It was nothing else but the notorious gasoline.

Wieleżyński’s concept began to gain supporters, particularly since 1907, when the most productive oil drill in Borysław burnt down due to one of the gas flares, criticised by Wieleżyński.

Despite initial scepticism, on May 20, 1912, the local authorities have authorised the construction of the first gas pipeline intended for public use in Borysław.  At that time, the company Zakład Gazu Ziemnego, Inż. Marian Wieleżyński sp. z o.o was established. The project involved the construction of two gas pipeline segments: the first one, 700 meters long, and the other, 14 kilometres long. It connected to gas sources with the refinery in Drohobycz. The gas transmitted in this way was to be used for heating boilers of steam engines. The investment was carried out extremely efficiently and professionally. The accomplice of Wieleżyński, Władysław Szaynok, contributed significantly to success. They both were invited to the United States by an American compressor company that appreciated the talent of both entrepreneurs. They have also learnt much about the overseas oil industry.

The first gasoline plant in Europe commenced its operation in 1914. Two years later, a new company, named Gazolina was established, and it started constructing another factory. At this moment, Wieleżyński began building his businesses based on the idea of ​​employee share ownership. The first buyers of Gazolina’s shares were Julian and Ludwik Ginda and Jan Błaż.

At that time, the partners transfer one of their companies to ul. 3 Sapiehy Street in Lwów. The building also housed the research and scientific company Metan, established by the future president of Poland, Ignacy Mościcki. Meetings and debates of three eminent scientists were called the “Forge of New Thoughts”. They developed an idea of oil emulsions separation and the production of propane-butane, what was launched by Gazolina as the very first company in the world.

 

A company like no other

The joint-stock company Gazolina was finally formed in 1920 from the merger of the two companies developed so far by Wieleżyński. Wieleżyński, Szaynok and Mościcki were among its board members. In the year of its establishment, the company produced 3,524,000 cubic meters of gas, 1 520 tonnes of oil and 593 tonnes of gasoline. At that time, the first statute of Gazolina, defining the principles of employee share ownership, was also created. The General Meeting of Shareholders approved it on February 22, 1922.

In 1926, almost 70% of the employees were already shareholders of the company they worked for.  A year later, the company prospered so well that it was able to pay six times the minimum wage!

Wieleżyński offered the co-owners of Gazolina to invest the surplus into the development of the company, what they voluntarily agreed to. As a result, funds for the discovery and exploitation of gas deposits in Daszawa were unlocked.

The statute divided the employees into permanent (those who co-founded the shareholding) and temporary (those earning less than co-owners of the company). The participation in the shareholding structure was encouraged by the cyclical allocation of a given number of newly issued shares at preferential prices. Shares were allocated to both types of employees, and the amount was proportional to earnings. The condition for becoming a permanent employee was the obligation to buy once a year the registered and inalienable shares of Gazolina for an equivalent of a one-month salary. Each permanent employee had a right to acquire any number of such shares, what was done willingly, as they had a privilege of five times the voting power.

The profit from the held shares was paid in the form of a dividend. In 1925-1930 it reached 20% of the invested capital. Stocks, despite being individually owned, could not be stored privately. They were stored in a common deposit, which was looked after by the Employee Syndicate of the company, that is the trade union. The vote at the Annual General Meeting of Shareholders was also universal. Employees chose their representative who represented their interest. The strength of combined, privileged shares meant that employees quickly began to play a decisive role during the votes.

Co-owners instead of slaves

The foundation of employee shareholder fund was a severance system. The company paid its employees the equivalent of the capital invested in the company, and the company’s shares were still in their hands. A certified permanent employee was able to take advantage of the severance pay after five years of work, a non-certified employee had to spend ten years in Gazolina.

The family friend, Bronisław Wojciechowski, summed it up perfectly: “Maintaining a causal relationship between securing the employee’s wellbeing, also after leaving the company and them holding the shares, has become the basis of the entire organisation of the Company. If on the one hand, the company took on the weight of the severance of the yearly clearance, on the other – it has provided  itself dedicated employees interested in the development and success of the company, ardently working to reimburse for creating a production environment where they did not feel enslaved, but aware of their rights as co-owners. ”

In 1924, the share capital of Gazolin was valued at 1,500,000 polish zlotys (złp). It was divided into 75,000 shares with a nominal value of 20 złp each. 53,000 of them accounted for registered shares, and 22,000 – bearer shares. Seven years later, the share capital amounted to PLN 3,600,000 złp, of which 1,659,300 złp (46%) belonged to the employees.

World War II halted further development of the shareholding. There were plans to increase the share capital to 5,000,000 złp and issue 14,000 shares that were to be transferred to the employees. As such, they would gain 65% of the share capital.

 

Jews, Freemasons and Polish-owned capital

Gazolina’s biggest crisis occurred in 1924-1925, during the construction of the gas pipeline to Drohobycz. The trouble was caused by Wielżyński’s devotion to the Polish cause. He always criticized people who were on foreign capital services, detrimental to Polish national interest. This kind of intrigue led to the collapse of the Petroleum Society appointed by Ignacy Łukasiewicz and Stanisław Szczepanowski. For this reason, Wieleżyński refused – explaining that “he cannot serve under the orders of people unknown to him, who manage the affairs of Polish industry outside the country and solely in their own interest” – joining Freemasonry that would later be vindicated when decisions about his activity depended on the head of the Oil Department in the Ministry of Industry and Commerce involved in the Grand Orient Lodge.

Marian’s son stressed that his father considered Jews as the allies in building Polish economic subjectivity. “He respected many of these people as genuine autochthones of Polish lands, being a positive element in the fight against agents of foreign capital for the economic independence of a politically independent country”, Leszek recalled.

In the more difficult period of the company’s development, employees received only a symbolic remuneration. Owing to the employee’s ownership of the company, however, there was a sense of solidarity.

Everyone was equally affected by the worse financial results, and everyone hoped for the later profits that came soon. The gas pipeline could be completed thanks to the intervention of the director of Lwów Industrial Bank – Leon Weinfeld, a Jew personally engaged in pro-independence milieus.

After getting back on track financially, further investments began. 1928 turned out to be a breakthrough. At that time (for the first time in the world) the production of “gazol”, today called propane-butane, has started. It was exported to Belgium, Syria and Palestine. In 1929, Gazolin began construction of the longest, 82 km long gas pipeline connecting the Daszawa and Lwów deposits, what echoed widely at the Eastern Fair organised in Lwów. In 1930, the new Gazolina’s Central Factory kickstarted, with a capacity of 50 tanks per month.

In 1934, an old friend, and then the President of Poland, entrusted a special task to Wieleżyński. The Polish state has taken over from Germany 25% of the shares of the company “Wspólnota Interesów”, employing 30,000 employees. To take over control of the company, they decided to implement a system operating in Gazolina. After consultation, Leszek Wieleżyński, son of Marian, was sent to Silesia. The report prepared by him was submitted to Mościcki in 1934, and  “Wspólnota Interesów” was taken over in 1936.

A good model for difficult times

The involvement of employee-shareholders in their company turned out to be invaluable in many difficult moments. When Wielżyński was interned in 1918 by the Ukrainians as a Polish government commissioner and imprisoned in the Kolomyia camp, he did not have to worry about the fate of Gazolina. He left 45 co-owners who took care of the company. When he returned from internment, the company was operating without any problems.

The second test took place in 1920. A conflict between the Chamber of Employers and employees has been growing in the Borysław Basin. The situation was so tense that the trade union announced a general strike. The first employees – shareholders of Gazolina, Julian Ginda and Jan Błaż, also belonged to the trade union. They went to talks to the leadership of the regional union, where they explained that they did not have to strike because they earn more than the trade unionists demand in their postulates.

“If those truly thinking in Polish and working for Poland employers in Gazolina can pay higher wages than those in foreign service or their followers in the Chamber of Employers, that is not true that this cannot be done at all, only that one should want to”- they were persuading their superiors in the Union.

After such reprimand, the leaders of the union had nothing left but to dismiss Gazolina’s employees from a six-month strike.

The hardest test occurred in the autumn of 1929, just after the end of the 9th Eastern Fair. At that time, the Austrian-German consortium tried to buy Gazolina’s registered shares for an astronomical amount of 60,000,000 złp. The nominal value in the hands of the employees was 1,350,000 złp, and the entire share capital was 3,000,000 złp. The three largest shareholders were invited to the meeting to discuss their offer. They were: Julian Ginda (320 shares with a value of 32,000 złp, worth 1 260 000 złp), Jan Błaż (240 stocks with a nominal value of 24,000 złp, worth 1,059,000 złp) and Marek Marosz (173 shares with a nominal value of 17,300 złp, worth PLN 778,000 złp).

Wieleżyński introduced the offer to the co-owners and asked what do they think about the situation. Morosz took the first voice: “I do not know what Mr Ginda and Mr Błaż will say, I say that if it’s viable for these gentlemen from Vienna are worth it, then also for us. I do not sell! ” Błaż and Ginda admitted the colleague is right and refused to sell the shares as well.

A man who inspired the Pope

The idea of employee share ownership in the form as tested in Gazolina attracted interest of then Apostolic Nuncio to Poland, Cardinal Achille Ratti.

A few years later, as Pope Pius XI, he invited Wieleżyński to the Vatican so that the Polish industrialist would present the principles of his enterprises. In 1931, the encyclical “Quadragesimo Anno” was published, introducing employee equity to the Catholic social teaching.

“Current economic conditions strongly recommend softening, if possible, employment contracts through a partnership agreement. Various attempts have already been made in this regard for the great benefits and employees and owners of capital. In this way, workers and officials become co-owners or coordinators, or in what way they participate in profits”, the Pope wrote.

The Encyclical has inspired even a Basque priest Jose Maria Arizmendarietta, who in the 1950s created an industrial plant in Mandrago based on employee share ownership model. In 1988, it had more than 40,000 employees and currently employs around 3,000,000 people. John XXIII continued the idea of Pius XI in the encyclical “Mater et Magistra” and John Paul II in “Laborem Exercens”.

The concept of employee ownership, indirectly through Gazolina, affected France as well. It happened as a result of the Second World War that buried the potential of the company managed by Wieleżyński. After the invasion of the Soviets, the facilities were immediately nationalised and changed into UKR-gas. However, the values and virtues guiding Marian Wielżyński spread through the testimony of his sons, Leszek and Ignacy.

They both joined the army to face the invaders, and after the defeat of the defensive war, they found themselves in England. In 1942, Ignacy went through the training of Cichociemni in the company of the French, with whom he eagerly shared stories about his father’s plant. One of the listeners was a close associate of General de Gaulle, who conveyed the news of the commander of French troops. De Gaulle supposedly admired the Gazolina system, and he wanted detailed notes on it. Leszek Wielżyński undertook the task and prepared a detailed report for the general. The French leader turned out to be a strong supporter of employee shareholding. Throughout his career, he was urging to spread it across the country. Thanks to this, France has become a European cradle of employee ownership. Today, the French are the leaders in the European Federation of Shareholders.

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Marian Wieleżyński died in Lwów on April 12, 1945. In today’s Poland, employee share ownership is still unknown or associated with utopia. Would an employee own part of the plant? Why should an employer share his heritage with strangers? Why would an employee invest in someone else’s business? Meanwhile, Wieleżyński’s experience is worth reaching especially when more and more often we are worried about the lack of mutual respect between the employee and the employer.

The author used the work of Jan Koziar entitled “Gazolina S.A. The first Polish employee company “and memories of Leszek Wieleżyński about his father “Working together, common yield. Life and work of a wise man”.

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