Eschew Obfuscation - Espouse Elucidation

Freedom of Speech Doesn't Ensure Freedom After Speech
DECEMBER 4, 2012 5:41AM

Companies Don't MakeDecisions ~ People Do...

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Companies Don’t Make Decisions ~ People do.

I'm not sure when the term "socio-economic system" began to be used but it has, alone, probably caused more misunderstanding than any other three words ever have.

We do not have a "socio-economic" system.

And I don't give a damn what any ivory tower, academic chrome dome says. We have a social system and we have an economic system. Two systems – not one. We have other, lesser systems, by the handful, too.

Granted the two are very much entwined but they are not one entity. The social system determines what our goals are as a society, tries to find ways and means of achieving those goals, and works, of necessity, on the principles of co-operation amongst the members of our society. We MUST co-operate to select those who will manage our society, for mutual protection, and to share the social work-load.

Our economic system is diametrically opposite. It is NOT a co-operative system. It is a system of competition. Every company, every person working for a company - from the CEO to the mail-room kid - is competing for personal advancement. It is presumed that this competition allows "the cream to rise to the top."

Sometimes that is true and sometimes only the dirtiest, back-stabbing few reach the top. But whether it is the cream or the back-stabbers who reach the top, they have the same job to do; they must make profits to put into the hands of the shareholders.

Let's be clear; it is not "the companies" who decide to keep wages low. It is not “the companies” who decide to maximize profits for the shareholders in a short-term, short-sighted manner. It is not “the companies” who bring in automation and engage in off-shoring of jobs. It is people who make those decisions. Management people.

I doubt very much that very many of the ideas, that are put forward to accomplish the goal of profit over all, come from the CEOs. Such ideas come up through the various levels of management; often originating very low in the pyramid, and climb the layers of management, until they reach the board of directors and the CEO. It is by formulating and advancing ideas like this that individuals within the company compete with their fellow employees to earn promotion. So let's disabuse ourselves of the notion that it is senior management that puts forward all of these ideas. It isn't.

The responsibility of senior management is to arrange internal systems so that such ideas climb up and come to their attention. They then have the responsibility for recognizing the good ideas (good in light of corporate goals such as increasing short-term and/or long term profits) and assigning responsibility, for bringing them about, to their immediate subordinates who will initiate the implementation of them. This is not unknown to you.

The point I'm making is that the basic precepts of a social system are very different from those of an economic system. They are at odds with our, capitalist, economic system in nearly every way. This means that those two systems are competing for dominance. At present the economic system is dominant. It is not evil or bad for doing so. That's its job. That is what it is supposed to do. Fire burns, water is wet, economic capitalism makes profit. None of them is "consciously" interested in doing the society any harm; all just blindly do what they do. That is their nature.

It is up to the people of the society to establish that the social system is the predominant one. The social system serves ALL members of society. The economic system is a tool. It is a tool whose purpose is to serve the social system. NOT merely a handful of individuals within that social system - ALL of it!

When the social system is dominant the economic system will not be able to run amok with notions of seeking to maximize profits at the expense of the citizens.

As automation is introduced labour hours ought to be reduced while introducing company shares as part of the compensation package to the workers so that they can partake of the profits they cause the company to earn. At present only senior management and individuals who purchase, or inherit, them hold profit earning shares.

This ought to be extended to everyone in the entire society over time. With everyone having personal ownership of a direct stake in our corporations, we can expect more product loyalty, happier, better compensated workers, more relaxed and confident managers, and a whole host of benefits. Not the least of which will be to set our society back on the road to making capitalism a system of which we can be proud. Done right it can be so good for the whole society that it'll leave those silly socialists looking properly foolish.

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Yes, the people or the 'sheeple' as you often call them are being managed. A sad state of affairs.

You make some good points about separating the economic system from the social system. Although it's true in theory that senior managers make decisions that increase return to shareholders, this is only true of companies that pay dividends. A lot of companies don't any more, and where they do, they are often very low - around 2-3%. My mother used to make her living from the stock market. Prior to the mid-eighties, it was a reasonable expectation that a stock you invested in would pay a 5+% return.

This all changed in the mid-80s, when people were encouraged to buy shares for the killing they would make when the stock price went up. This was around the time that CEO salaries started to increase steeply, often due to employment contracts that rewarded them with bonuses for raising the price of the stock.

Based on my mother's experience with the market (she always voted all her proxies and always voted against management), I tend to agree with Michael Hudson that CEOs and senior managers take decisions that will increase the stock price - that they stopped carrying about the shareholders 25 years ago.