What if we simply defined that in order to hire someone into a company, you had to give them equal ownership in that company? We presently think of hiring as about salary. But what if it wasn't just that. Salary could still vary, but the choice of how the company was administered and who was important and how they were compensated would be decided by equal vote of all owners. What if the only valid way to involve someone else in your endeavor was to give up ownership?
Just free your mind of why that couldn't possibly work and think about the fact that nations work this way now—allowing someone to become a citizen gives them an equal vote and stake. We don't have any notion of preferred citizens, or higher ranking citizens. So what if we did that for companies, too? No boards of directors, no stockholders other than employees.
One's first impulse might be to say that no company owner would ever hire under those conditions, that the owner would not be motivated to give up such a thing. But if everyone had to do it that way, then someone eventually would do it because no one is an island who can do everything alone. People might focus on hiring as a process of choosing someone they were going to commit to, like a family or a tribe. And once hired, everyone from a janitor or clerk to the President would have an equal say as a stockholder, just like voters in a small town. Suppose there were no other sense of ownership in a company than that?
Maybe the world would be full of small companies with loose-knit relationships because no one wanted to dilute their stake in their own creation enough to have a big company.
Or maybe companies would get large but still controlled by their own members. Then they would be sort of like little democracies. It would be like unions, but with no management to blame for not getting the concessions they wanted; the union would be the management.
It's likely not workable for various reasons. But I still found it a useful thought exercise to think about the issues we take for granted in terms of investment, loyalty, stake, profit, etc. One must periodically stretch one's mind to think new thoughts and to remember that the world should be what we make of it. Especially now as the world is known not to be working well, it's worth considering how we might reinvent it. Getting from here to there is another matter, but nothing ever happens unless someone has a vision of where they want to go.
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However- I like this idea a lot. This is a true democratization of the work place.
My initial thoughts are as follows:
- Presumably these ownership rights would not be transferable like regular stock? It would be absurd if a person could get a job and thereby acquire an ownership interest in his/her employer, and then sell that interest when he/she resigns.
- If a company gets big enough, the individual employee, even though he/she would be a shareholder, would still be fairly powerless. Think of the power the holder of a single share has to influence a large company.
- How would these companies raise capital? You have made clear that all employees would have to become part owners, but would all owners have to be employees? If a company needed to raise capital by issuing new shares, the existing employee shareholders would experience “dilution;” i.e., their votes would be less powerful.
There is a somewhat similar concept in Germany called “codetermination” (Mitbestimmung). Companies that have a certain number of employees are required to allow their employees to select a certain proportion of the members of the board of directors, which is ultimately the main power of a shareholder vote anyway. Limiting the requirement to just very large companies might be a more workable approach. (And obviously there are a lot of non-employee shareholders that vote as well in Germany.)
I don’t know much about codetermination. I know that it means that large German companies have to be more accommodating to labor but I’m not sure in the end that it’s a radical difference to the US system.
:-)
I suspect that wingnut types would turn this around into "Why can't governments be run more like companies?"
Yeah, what IS all this crazy democracy/equality crap that's holding us back? We need a CEO, not a president--somebody who will maximize profits and minimize headcount! At-will citizenship...your status as a worker--er, citizen--may be revoked by either party at any time...yes, I can see this thought exercise going awry into Ayn Rand-ian wet dream territory, indeed.
javajane, how do you feel about democracy and equal votes? And nothing says you have to take on equal partners. You could just take on none. Presumably your motivation would shift once there was no other way... The question isn't what you're used to but what people could become used to... Mostly as a way of understanding which things we like are things we must have as primitive notions and which things are things that are just derived from other presuppositions we made but that we'd change if circumstances changed.
the problem is that if it's not equal, there's no way to legislate it because it requires judgment. But no, no one is saying you have to give away anything. If it's all you, then you can just not hire anyone (in this hypothetical—it is a hypothetical, after all... I've seen you call for stranger stuff without adding that caveat). And as icemilkcoffee suggests, it's not outside the paradigm I proposed to have a “vote people off the island” clause. And anyway, in this alternate model, what it means to “own” part is not the same as in other models, since you can't sell your shares. All it means is that you have a voting stake in all the company does. So it's less likely that people who have no, well, emotional stake in the company will vote you out.
The whole notion here was to think about the idea that people who may know your company only as dollars and cents on some asset sheet somewhere should have more right than the people working in a company to decide what that company does next.
I have some other paradigms though—even ones I might propose more seriously. So stay tuned for related posts sometime. And thanks for stopping by.
icemilkcoffee, those aren't things I was thinking of, but they are examples of the kind of emergent concepts that come when you do a paradigm shift. It's not like you change the rules and people use all the same strategies, but rather new strategies emerge. As some might say, you trade the problems you're familiar with for ones you're not, and it's called progress. I do think sometimes there is value in just plain mixing things up, and certainly just as a hypothetical I think it frees the mind a bit. I'm not so sure about the earning one's stripes thing as far as its potential to work in this system since as with Larry's concern the problem is that if you can have an earn-in period you could (a) find it infinitely long and (b) find yourself fired before you had earned your way in, effectively implementing a lockout. Perhaps if there were strict rules on how long the apprenticeship could be, etc., it might work, but if it were left to a company to decide, that's where I'd forsee problems.
Alright, fair enough, but I didn't say all the details were thoroughly worked through. Let's explore patches. Suppose founders have immunity from being voted off? Does that repair it? What are the specific concerns you have for which you think you need unequal ownership? Is it possible to address those specifically? At least give me some examples.
Also, perhaps there could even be some non-founders who have a certain amount of time in service that gets them if not tenure (because I don't like the life tenure thing, which has kind of messed up schools), at least a longer notice requirement for getting rid of them... something that makes it more easy to plan.
There's a certain similarity between citizenship and this perspective on ownership. When I become a citizen, there's both good and bad I have to deal with. Maybe I get access to social programs, but maybe I have to pay taxes or follow strange laws non-citizens are free of, for example. I'd expect that hiring-as-becoming-part-owner would require some exposure to risk on the part of the new employee as well, if it were at all workable, and not everyone would be happy with that kind of risk. Still, if it were just the way things were done, it would be pretty interesting...
This was a fun debate for me. Not only did I learn (sort of) some new terminology, but I hope I succeeded a little in getting people to use their brains a bit and not just take things in packaged form. I'm really not proposing this in serious form (I mentioned up top that it was surely full of holes), and as Larry points out in his typical robust style there are (literal, he says) fatal flaws in the idea.
So again in the spirit of getting people to think about how many options the world presents, I'm going to do something debaters around here (or anywhere) don't often do and just openly cede Larry the debate point on this one. I don't want to get to the point of drawing battle lines in any more strong way since the only serious battle I intended was with our preconceptions.
While I'm trying to conceive the world in other possible ways, and this was just one of many such exercises in thinking aloud, I think Larry is right that even in other ways of thinking, there are certain realities one has to face. And I don't want to get into the place where I'm trying to say that the issues he raises aren't reasonable.
So if there are other thoughts to be had on this, by all means, feel free to offer them. But I am at this point going to exit the mode of being advocate for a particular hypothetical idea and just enter the more mellow status of detached participant, with my thanks to all for playing along.
I like your thoughts. Actually, you spoke out what I had thought before, this is great! saves me from writing again. :)
Yes, the current corporate system has a fundamental flaw indeed. One example, in the knowledge-and-creativity-driven economy context, a hi-tech company hires tech staff to create new technology to (in some sense) revolutionize an application; but tech engineers/architects have very little stock shares; according to that legal paper says, these staff can be terminated by employer at any time without a cause. Under such condition, how could these staff exert their full entrepreneur spirit to attack tech problems and bring great work into reality? The problem is, after they have created great things, they can still be terminated at any time without a cause, so they can not benefit in long term from the great work they have created, thus they wouldn't have the motivation (and reason) to make great tech things happen, why would they? The corporate management has control on resources, policies and power to put themselves at absolute advantage, while the employees who make each building block of the enterprise don't have a say on the corporate's operation and decisions. Isn't it a dictatorship? How would employee feel? They might feel alienated from what they are doing, ironically.
"either party can terminate the employment at any time without a cause" (also implies no obligation to provide severance pay, which is completely under corporate's mercy, zero or a few months pay, don't count on it before it turns out to be more than zero), this is a cruel term for workers actually. So that the workers got to keep their skills transferable to other work places before they are terminated. An Intel employee actually has nothing to do with Intel at all, because he/she can be terminated by Intel at any minute without a cause (such that he/she will suddenly become a foreigner to Intel); vice verse. The lack of common interest/foundation between employee and employer is the fundamental flaw of this system. Under such system, "work/labor" is sold and bought as a commodity, which is essentially a blasphemy against the holiness of work, especially creative work.
Each worker should assume a "share (I don't mean stock)" in corporations, regardless of their compensation, which can make them feel they are really a part of the organism, that they won't be terminated for profit or unfair reasons; such that the workers will have much higher motivation to carry out great work, care more about the collective gains and loss of the operation, treat his work as his baby. The current corporate system is ok, but innate with corrupt and counter-humanity natures here and there.
I am afraid, this sort of thinking eventually will leads to a fantastic stage of human development in our history. And many status quota will be gradually torn down and be rendered irrelevant to our well-being. I am not socialist, but you don't necessarily be a socialist in order to think out ideas that really boost our well-being.
Back to your post on "education paradigm", why do we need diplomas in the first place? such thing is from medieval age, far behind what the current tech-societal platform can accomodate. BTW, in Germany and most of other continental european countries, their higher education is virtually free (a few hundred Euro/year for undergrad and grad), this doesn't mean their quality is poor. Their tax is high, but not too high, 40-45% in Europe compared to 30% in US, is that a huge difference? But a student health insurance costs 60 Euro/year compared to ~$1500/year in US.
We are at an edge of change, but where should we go? we need wisdom, imagination, reason, think out of box, etc.
You post is thought-provoking, support your thinking!
I think this is right, and is finding another way to get across one of the main ideas I was trying to get to here—that there's a sense of stake that is not being addressed. Larry has rightly criticized my proposal on a few of the details but I remain convinced that there's an issue buried in here which needs to be gotten at, and your remark helps to articulate it. I was waiting for you to say "non-compete" but you skipped that one; it's worse than just you can be fired without cause—you can also be forbidden from doing the thing you are good at... or, at least, made to feel you can. In some states, I understand non-competes don't hold up well. But unfortunately that only helps those willing to risk it... for people who worry a contract they signed, even one that is probably not enforceable, is something they must hold to... well, I should go put this remark into a post, I guess. I have more to say and can see I'm going to ramble on.
Also, I might suggest that you separate finance from voting. Right now, a share of stock does both: give you 1/N voting power, and also 1/N right to profits.
You seem more concerned about making decisions, so maybe you want to think of a structure for voting, without completely disrupting the existing uses of financial stock (e.g. raising investment money).
Finally, on voting, you need to decide what kind of democracy you have in mind for corporations. Surely you don't want the janitor voting on whether to outsource RAM chips from Taiwan or from Korea. Or do you?
Even political governments generally have representative democracy. The voters elect professionals, who then manage the day-to-day decisions.
So: do you intend to keep the board of directors? Do your employee-shareholders only vote on things that current real shareholders vote on? Or are they doing much more micromanagement?
It's not unreasonable to have a corporate structure that is run more as a partnership, by consensus, than most companies. I don't think it scales well, but it can work at small scales.
In fact, based on comments I've seen, I have a slightly revised formulation of this I'll throw out for discussion at some point.
It's far from clear that a good political structure is to have everybody vote on everything ("pure democracy"). For myself, the Bill of Rights (what government is not allowed to do) is by far the most important part of the US Constitution. I have great concern about the so-called Tyranny of the Majority.
So: I agree that you've proposed a thought experiment, that moves corporate governance closer to (idealistic) political governance. I don't agree that this is a good idea.