The American Corporation Is in Crisis
bostonreview.net
bostonreview.net
For pirates, the solution was multifaceted, but the most critical components were: * Profit sharing - The riches captured by a pirate vessel were split amongst the pirates in a remarkably egalitarian model. * Democracy - The Captain and Quartermaster of a pirate ship were elected democratically by the crew.
The result was pirate ships were able to outfox the established navies of the time and manage ships with crews upwards of 100 all without the support of established judicial systems.
Disclaimer: I am one of the co-founders of a design and development studio based on these exact same principles:
https://www.fountstudio.com/blog/yes-we-have-a-pirate-code-1...
> The result was pirate ships were able to outfox the established navies of the time and manage ships with crews upwards of 100 all without the support of established judicial systems.
This is fascinating to me. Do you happen to have any references or further reading you're willing to share?
https://www.amazon.com/Invisible-Hook-Hidden-Economics-Pirat...
"The Labour Party’s plan is detailed. It ensures that investors are not injured by having their share value diluted because it institutes a transition process: every year, employees gain a 1 percent ownership stake, up to a cap of 10 percent. Once funds are in a trust, then the shares are not available to be resold. This is crucial: the stakes are not a private, freely transferable wealth asset, and since employees don’t purchase stakes, they can’t sell them when they leave employment. Rather, by becoming an employee of the corporation, you receive an ownership stake in the employee collective trust—a stake that remains in the trust if you move to a different job. So long as you are an employee, though, that stake grants you governance rights and the right to receive a share of the profits."
But most professional employees get an 'ownership stake' (shares) in the company as part of their compensation anyway.
Most - greatest in amount or degree i.e. greater than 50%
Professional - engaged in a specified activity as one's main paid occupation rather than as an amateur.
Were you being facetious, or do you honestly believe that most people in the world receive shares as compensation in their full time jobs?
Neither I, nor anyone I know, has ever received shares as part of an employment contract.
https://en.wiktionary.org/wiki/professional_class
Most public-sector jobs for university educated people include shares of some form or another for employees. Some times it's a very large proportion of the compensation, or even essentially all of it, for some management.
Forgive me if I am misreading your post, but it appear you're saying that a minority elites that are employed by a company already receive shares, so this is already happening.
Under this plan, all employees receive a stake in the company, which is more in line with what the original article was suggesting.
...err well they aren't using the word at all so it's a bit odd to say it's not the definition they're using.
> Forgive me if I am misreading your post
My point was that it wasn't some new radical idea - many people (not really elites - random programmers at tech companies, or marketers at agencies, or whatever aren't 'elites' by any stretch) are already getting this and it works fine without government intervention.
I would guess that at least 10% of Google, for example, is already owned by the employees? I may be wrong.
My wife has never received, and likely will never receive, shares as part of her compensation considering all of her experience is with non-profits.
Also, I suspect you meant "private-sector" here, not "public-sector" (i.e., government work).
Because last I checked with mine, they really belong to the bank, and are used to fill in my balance sheet. No voting allowed.
In 30 years, that might pool into ~10%. However, there is no mechanism for me, and my fellow coworkers to turn those shares into any kind of power over the board.
Me personally controlling a tiny fraction of a percent of voting shares does not make my interests align, in any meaningful way with the board. It also means that I have no ability to influence the board to consider my interests.
I need to act collectively, with like-interested co-workers, to have any influence. However, there is way too much friction for me, and like-minded coworkers to meaningfully undertake any collective actions.
In fact, this is understood so well by my employer, that I, and my peers receive non-voting shares as my compensation. I'd never be able to put the voting power to use, anyways, and neither will anyone else who has to gasp - work for a living.
1B pounds * 1/10 * 1/10000 = 10k pounds
Of course, that's only if the company offers a dividend. I wonder how buybacks are modeled in this case? Since the employee share isn't marketable, the employee doesn't derive any immediate benefit from a buy-back. I guess you'd have to increase the employee share beyond the 10% limit at that point. In theory, the company could over time buy back all the non-employee shares, then it would be employee-owned in its entirety. And if the company offers more shares? Do the employees get diluted? I guess not. That seems weird too.
Not necessarily true. Much of that talent might have joined precisely on the hope of receiving above-market compensation if the business did well.
Their policy ideas are very unusual, they often make no economic sense (even internally), they consult no-one outside trade unions and their hard left sect grouping within the Party (Momentum), they use no research or any evidence to make policy proposals...it is extraordinary.
With this idea O'Donnell literally announced it, and then tried to fill in the details later (iirc, this came out months ago, and it was a total mess, it made no sense...and they have been trying to polish it ever since). For a modern political party (they aren't modern, most of their ideas are from the 70s), this is unusual.
The sum total of their policies involve either taking stuff from other people or redistributing power to their party. One other gem of theirs was moving the BoE back under govt control, printing £100bn, and then appointing their allies to spend it...I am yet to come across anyone who takes their ideas seriously (it isn't only this, the guy responsible for this policy has also said he is going to "lynch" people...srs).
Increasing the level of knowledge amongst voters is really critical. Economists and, in fact, most of the people in the Parliamentary Labour Party do not take these policies seriously. They aren't serious. Voters in the UK really deserve better.
I think, on the other hand, that public benefit corporations and other governance structures are in crisis, because it is evident that they are getting outplayed everywhere you look.
EDIT: Non-profits have been doing well though. It seems easier to go "all in" on a charitable cause, or "all in" on a greedy cause, but combining the two into an amalgamated pro-social gung-ho business (a la public benefit corporations) is not easy to do.
I might ask you to try your own advice. By what metric is Europe decades behind?
Others factors vary by country but: regulations on labour, regulations on business formation, regulations/subsidies limiting competition, poor/non-existent capital markets, corporatist industrial policies (i.e. Germany where you have large employers controlling the state and determining policy), regressive tax systems, trade unions (in some areas they work very well, in others they don't e.g. UK where you have a major political party that is controlled by trade unions).
I think one important point too: the UK is very bad as well. It is often held up the nation that is closest to the US and this is definitely true in many areas - progressive tax system, low regulations, strong capital markets - but in terms of results it isn't even in the same ballpark. Management quality is a large part of this story (if you can find it online, there is a lot of research on productivity and management quality in the UK).
This doesn't mean that every country is poor - Netherlands and Denmark, in particular, do some things very well - but is the whole area anywhere close to the US? No.
The general difference is, imo, a more meritocratic society (ref the point above) but also a far deeper understanding of a business and what it is for (in the UK, most people who run businesses have no idea...although it is rarer now, I have talked to CEOs of publicly-listed billion pound companies who have no idea how to measure capital in their business, no idea how to measure returns or even what those measures mean...it is a clown show).
The latter is a function of MBA training (you can get all this info yourself btw by just reading), lower share of family-owned businesses (this is a correlated factor, family-owned businesses in the US actually tend to be very well run...in Europe, they are far worse), and the importance of capital markets (in somewhere like Germany, all you need to do is impress your banker, most German bankers are clueless, and they will lend to you even if your business in insolvent...unsurprisingly, Germany's banking sector now looks insolvent so that process is inefficient...capital markets don't always work well but they impose far more discipline).
Btw, there is a lot of research on this if you Google. Which I am sure is far more insightful than my random anecdotes and generalisations.
The family management stuff should be easy to find but - https://www.sciencedirect.com/science/article/pii/S092911990... - is an example.
He must be taking pride in the fact that managers grind employees into dust in the US...US managers have overseen the removal of employee benefits like health insurance and pensions, managers have kept worker wages stagnant decade after decade...meanwhile worker efficiency is at record highs, profits are at at record highs, executive compensation is at all time highs, and there has never been a wider gap in executive compensation vs employee compensation.
It's almost as if there are two ways to look at the economy of a country: one looks strictly at how the economy benefits the owners (not sure what the right word here is but I mean Bezos' of the America) and the other looks at the benefit the economy provides to the rest of the people.
The reason you are having this issue is precisely because you are thinking in terms of your two ways: a gain for one group can only come at the expense of another. Ironically, the reason the US is successful (and the reason why some countries in Europe are successful) is because this isn't true. If you think this is true of the US, you have not seen a society where there is actually true (you are just angry because you think everyone should suffer as much as you...unf, this is a common aspect of human nature).
Btw, Americans rarely understand the problems that come with other health systems. I am in the UK, I spoke to someone yesterday who has severe mental health problems and they are on a range of drugs...a couple of weeks ago, they turned up to the pharmacy...no drugs. No explanation. Nothing. No drugs. We don't have them. You will have to stop using them. Why? Drug shortages, this happens in the UK because the NHS can't afford to pay the same prices as other countries and the UK market is tiny so we get shortages when prices rise. And some expensive drugs just aren't provided at all. If you have a rare type of cancer, no drugs (we have one of the worst records for cancer survival amongst developed countries). If you have a rare type of epilepsy, no drugs. It is important to actually do the research and look at these issues properly rather than the usual "hurr, bad thing happen...must be dis" (I have a relative with such a condition, the "policy" of the NHS is not to treat her...that is a quote from a doctor, it isn't the policy of the NHS to cure a human being).
Is it something along the axes of innovation, efficiency, or profitability?
Keeping in mind that the article we're discussing already frames the discussion as (paraphrasing): US management and boards are great at their job, but are the assumptions behind corporate governance/stakeholding correct?
US housing also extremely efficient for filtering unwanted people out of populated areas. Europeans could stand to learn a thing or two from that (although I've heard London is doing a good job of emulating us.)
In the UK, there are no new houses at all in most cities and developers aren't allowed to build new ones because of planning regulation (designed by people who already have houses in that area). Also, remember that the UK is a small island with a fairly large amount of people on it (and remember that population density numbers are skewed by Scotland which is the same size as England but has 7% of the population)...that kind of thing isn't obvious when you live somewhere with infinite land.
Pointing to one or two things and saying: "Oh this is so terrible, we need to knock it all down" is not a smart approach. Most European countries have experimented with this (the UK went bankrupt doing this), it isn't a good idea (particularly when you have a system that is already the most successful).
Only outside the East Coast and California metro areas.
Except for the people who actually live in CA. They all want to live in Oregon, Colorado or Texas.
The way to do that is to avoid making grandiose claims on the large topic and instead make more specific statements including good information. Basically: less sugar more fibre.
Btw, for any avoidance of doubt (because unf, you need to say this kind of thing on here otherwise the neckbeards will get triggered): I have postgrad qualification in studying this (economic history/ipe), I have studied this for most of my adult life, and I have practical knowledge of this analysing companies in Europe and US when I worked as an equity analyst. If you think I said anything subjective or controversial, you shouldn't be correcting other people. Keep doing God's work.
> New policies could ensure that all the stakeholders who collectively generate a corporation’s prosperity then benefit from its wealth.
I don't agree with this slight-of-hand. Employees are stakeholders, sure; they will lose their job if a company goes under, and may not get a promotion if growth at the company stops. But they are NOT owners of the company in equity terms.
Why is nobody successfully competing against FaceBook? Is it because everyone has a low IQ except FaceBook? No, it's the Network Effect: you can't get sufficient customers to compete until you get sufficient customers, creating a Catch-22.
Real work and real competition is missing from Big Tech. I'm all for rewarding those who build better mousetraps, but not those who keep others out of the mousetrap business and put the mouse meat into your burger without telling you.
Society has learned the hard way how much our data is worth, similar to how we slowly learned the danger of cigarettes. Demand, unfortunately, remains. So, suppliers will exist to sell what is in demand. Facebook's market share is not invulnerable, however!
I think Steven Pinker's case for capitalism is strong; still, it may be that a significant portion of that progress derives from "cooking the books" with regard to externalities like ecology, the social fabric, and quality of life. (The fact that things seem to keep getting better on average also obscures the possibility that we're "leaving money on the table" in terms of how much more life could have been improved, in the absence of rent-seeking, perverse incentives, etc.)
The shareholder model in particular does seem to have two layers of moral hazard: one for externalities to the economy/ecology as a whole, and another for short-termism and fixation on valuations/exits rather than sustainable revenue and relationships. A single owner, even if the worst kind of extractive rent-seeker, at least must take responsibility for their choices (including the potential for pro-social principled choices!), as opposed to getting lost in the crowd of "any other rational actor would make this same choice, so I'm off the hook".
Douglas Rushkoff does a good job of examining the other side of the capitalism=progress coin, without throwing out baby with bathwater: https://rushkoff.com/books/life-inc/
What about things like healthcare costs, lifespan estimates, mass shootings, addiction rates, cost of housecare, and economic movement?
EDIT: Wait, decades? Are you sure? Wasn't the 2008 recession just over a decade ago?
What do any of these things have to do with corporations?
It sounds like your gripe is with something else.
healthcare costs, lifespan estimates, mass shootings, addiction rates, and cost of housecare are all basically just the same thing from different angles: the healthcare industry
The healthcare industry is extremely successful if your goal is to maximize shareholder profit. It's a complete failure if your goal is to maximize consumer value, however.
Corporations are more or less the same everywhere, but different places within the U.S. have vastly different housing policies, social challenges, etc. It strains credulity to conclude that corporations are somehow to blame for your laundry list of problems, rather than the specific policies that directly address those issues.
The numbers grew but how much did quality of life increase in the past 20 years in the US? A vast majority of the population are in debt, the middle class has all but disappeared, unprecedented levels of working-but-homeless. But profits dose, hurrah!
I have a magic little rectangle in my pocket that can answer an obscure question, get in contact with someone or order me a pizza faster than the president of the united state could get those things done in 1999.
My car tells me when a tire is low. My oven automatically turns off when it's done baking for a pre-selected time. Etc. Etc.
Sure, all that stuff existed in 1999 but it was rare or primitive. Today even someone living paycheck to paycheck has that standard of living. Technology has come down in cost and permeated our lives resulting in unprecedented convenience. It's the difference between the USSR launching the first satellite once at great expense and a private company flinging a car into space because "well we needed a test payload and why not". All this comes with trade-offs and a learning curve but so does every other bit of progress humanity ever made.
You mean when I was in grade school in the '90s? Because my memories of being a young adult go roughly:
* Dot-com bust
* 9/11
* Jobless recovery and War on Terror
* Rising inequality, low growth
* Housing bubble
* Global Financial Crisis
* Bank bailouts, rising inequality, recession
* Slow-going recovery, rising inequality, falling real wages
* Real wages finally start ticking slightly, slightly, slightly upward after decades
* Rising inequality, low growth
* Trump elected
* Rising inequality, low growth, economists now talking very publicly about corruption and "secular stagnation"
Why should this be a goal? Is there something wrong with affluent people, or white people, or affluent white people?