Employees are often not in a position (financially or sometimes legally) to take a reduction in cash in order to take an increased proportion of their value in equity.
Maybe VC money warps the economics so that every company needs to be winner takes all lotto tickets for the investors. Having it be worker owned gets rid of the extreme ROÍ VCs expect.
If you know any papers on the subject I would be interested though.
VCs are not interested in worker-owned coops. Economic climate works against the concept at scale. Workers are also divided on it and are not organized around enabling it. Employers are highly coordinated on maintaining current employer-worker relations.
edit: here is some related reading you might find interesting:
- Sociocracy - consent-based decision-making organizations (as opposed to dreadful unanimous decision-making which doesn't work and is a common criticism of non-hierarchical organizations) https://www.sociocracyforall.org/sociocracy/ // https://sociocracy30.org
- a UK tech co-op network: https://www.coops.tech but it seems a lot of these are more tech services than product companies
REI is a consumer coop, not a labor co-op (and WinCo, while employee-owned through an ESOP, is not a co-op at all.)
Cooperative Home Care Associates, a home health care agency HQ’d in the Bronx, appears to be the largest US labor cooperatives (and labor intensive service industries are probably the most common places to find labor coops in the US.)
> Maybe VC money warps the economics so that every company needs to be winner takes all lotto tickets for the investors. Having it be worker owned gets rid of the extreme ROÍ VCs expect.
Right. VC goals and labor coop goals are almost never aligned, and instead are almost diametrically opposed. Labor coops tend to favor conservative expansion and risk mitigation and stability. VC’s want to swing for the fences on scale—a succesful steady-state business that will pay its founding employees good pay forever but not expand much is a massive failure for VCs, but a win for a labor coop.
REI is owned by people who pay a one-time lifetime membership fee. Those co-op members elect the board fo directors who runs the company.
Employees might want to receive the most cash they can right now (and therefore prefer 100 units of cash over 90 units of cash and 10 of equity compensation). We shouldn't force them to accept a different mix of compensation, particularly one which forces them to invest in their employer via such a tradeoff. They might choose to work at business X instead of worker-owned cooperative Y for any number of reasons.
Employers think about the value proposition they offer to attract and retain employees and if there are 100 units of compensation available to be paid and they have reason to think that employees prefer cash over equity, they are likely to offer all 100 units of comp in cash rather than 90 units of cash and 10 units of equity. There's no sense tying up 10 units of equity that an employee only values as being equivalent to 5 units of cash.
In the case of workers working for public companies, they have a straightforward way to invest in their company if they want: take some of the cash and buy shares in the company. That's barred in most cases for private companies by practicality and accredited investor rules.
https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr...
As you find reasons to object to that, many of those reasons are likely the same shared by others and make this a vastly less common arrangement, because someone has to take on the massive initial risk to start and fund the business through the unavoidable period of initial losses and probably wants to see a way to having a compensating upside in the event of success.
Brainstorming and figuring a way to address that might be a way to help you mold/nudge the world towards your preference.
When I make someone an offer, I give them a spreadsheet where they can plug in different salaries and equity stakes to see outcomes based on future funding events, valuations, and exit scenarios. Without exception the people who've leaned into equity have turned out to be the best performers and ended up with higher salaries anyway, but a majority favor cash up front.