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Comment by SoftTalker | Hacker News Reader

This is a really bad idea for the average worker.

"We've got a number of people that have been here 15, 20 years and they have $1 million plus balances"

Sounds good but they are catastrophically undiversified. Nobody should have their entire nest egg in one stock. Yes they are motivated for the company to do well, but so many things play into a stock price that are out of any one person's control.

Just giving them profit sharing that they can invest as they wish would have most of the same motiviations. Anyone making a decent wage and saving in a 401K should be able to save $1 million over the long term. And do it much more safely in a well-diversified portfolio.

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Agreed that there are some downsides for employees.

I worked at a company that incentivized owning the company's stock. The company was doing fine but it was still controversial among employees because of the risk of correlating your employment and investments -- if the company does poorly then you may lose your job and a large chunk of your investment at the exact same time.

(In practice there also ended up being some jealousy as people who decided to play it safe missed out on some large gains.)

(These) shares yield dividends right, even if the stock price itself is low? Profit sharing doesn't give you any say in anything.

Isn't there some asset insurance vehicle to protect against a catastrophic loss?

That's what options are for. But I find it more cost effective to just diversify my investments.

This is so backwards!

Workers are always at the mercy of shareholders (for whom apparently it's not bad to own a share?), and whom again and again will do a little layoff here and there because we need a percent or two more this quarter. Profit sharing will be the first thing to stop if results are temporarily worse. On the other hand, if the company is owned by its workers, nothing prevents them from redistributing all of the profits in dividends, aka, profit sharing.

What do you do when 51% of the workers vote to not redistribute profits and to lay off 10% of the other workers so the shares they own can grow by a percent or two next quarter?

edit: spelling

Comparatively to people who don't work here, they're incentivized against that.

They're not. If they let go of 10% of the staff the value of their shares (or number of shares) increases. This means that the next time there's a dividend they'll get more money. They're incentivized to decrease the number of workers and not hire any more until it starts hurting their returns. Same exact thing that happens when shares are owned by external shareholders.

That's an interesting proposition, and honestly I can't tell if you're right or not.

If it's worker owned, what happens to the shares when a worker leaves? Do they have to sell? In which case, is the company buying back, or the remaining workers (or is that the same thing?). If that's so, the share behaves less like a regular share, and more like a vested interest that doubles as a layoff package.

Also, is the value of a share that's owned by someone expecting a salary going up when there's a layoff? Since the only people who can buy are internal to the company (which is a very small pool), do you apply the same rules when it comes to valuation? I wouldn't presume its value behaves in the same way as an externally owned shareholder.

The incentive to keep the number of workers low is certainly there, though ; I'm wondering if that's more of an incentive against hiring (which you can see as a healthy thing).

You're right. There are a lot of questions that need to be answered in order to get a more accurate picture of the situation.

If we're only looking at dividends and the profit generation of the company stays roughly the same from year to year then its in the worker's interest to reduce the number of workers so that the same profits are shared among fewer individuals; increasing the per share value of those dividends.

A buyout of exiting workers doesn't actually reduce the value of the company as you're either decreasing the number of outstanding shares or redistributing those shares to the remaining workers. You're just trading one asset (cash) for another (shares).

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