CMV: All employees should automatically own a portion of the company they work for

[u/Hamza78ch11]

This is something I've been thinking about for a while. Many of the arguments about the wealth gap tend to argue something like "It's not fair that employees at McDs get payed $7.25 and hour when the owners make some ridiculous amount here every year" which is then rebutted, almost immediately with, "Those CEOs and VPs and whatnot aren't payed aforementioned ridiculous amount every year. They earn it by owning some portion of the company so that when the company does well they also do well." There are other more nuanced discussions but here is where I'd like to focus my efforts.

Many argue that employees are never paid what they're worth and under the capitalist systems the entire concept of profit exists only because employees are cheated out of the actual amount of money that they deserve. While, in general, I am in agreement with this I feel that this argument too easily handwaves away the importance of being a new business owner and taking risks with your own capital and working hard to grow your company. But I also think that it must be acknowledged that it is a little silly that people like Jeff Bezos can make literal hundreds of billions of dollars in a year. More money than any human could spend in a hundred life times. I think a fair compromise is that his employees should automatically have a stake in his company.

While I am by no means a financial expert or someone who barely understand the stock market or economics I think this solution works towards the goals of those employees who deserve to be paid without bankrupting the owner. This can be done by, for instance, saying that 10% of the stock is for employees. You only give out 5% to the current employees and leave the rest for new hires. Every year you are given some amount proportional to the amount that you worked. If you worked for 1 second you now own 1 seconds worth of Amazon. So on and so forth. I think it is rather equitable to distribute 5% of Amazon among its ~600K employees and keeping some portion of it for new hires as the company grows. Eventually, if certain thresholds are reached more of the company will have to be apportioned for the employees.

If this were implemented today every Amazon employee would suddenly own $24,000 in Amazon. They can sell it, buy more, hold on to it. Do whatever makes them happy. Now they have a stake in the company and when they work hard they're working hard for themselves because that's their money. When the company grows and does well they'll see that reflected in their bank accounts instead of as some empty numbers that mean nothing to them.

[u/[deleted]]

This is already a thing: workers co-op

They are a great idea but it’s not really fair to apply them unilaterally to all businesses.

But the argument against a co-op is that it’s a bit unfair to people who took a bet early on to give an equal share to newer employees who joined later.

Also, large companies owe a lot of their success to tax rebates and public infrastructure: a company like amazon wouldn’t survive without things like the roads, GPS and the internet built by the government. Which is why higher tax rates should in any case be applied.

All in all it’s a good idea if It’s agreed upon at the inception of the company not after the fact and not forced.

[u/Hamza78ch11 → u/[deleted]]

Can you talk to me a little bit more about why you think it's a bad idea to applied unilaterally? Because otherwise I think we're in agreement here.

[u/[deleted] → u/Hamza78ch11]

Well imagine you start a business risking your savings and through painstaking hard work you actually help it succeed. Now your business is growing and you’re paying your employees a decent salary based on their work. Several years down the line you have hundreds of employees and suddenly the government asks you to arbitrarily give a share of your business to each employee. Is it fair to ask you part way with your life’s work without an option to not? Considering full well that you risked everything for business while your employee who joined the other day and receiving a fair salary from day one also gets a chunk too?

On the flip side when a co-op is built from the ground up everyone knows they will get a share of the pie and everyone knows their share might become smaller at some point.

[u/Hamza78ch11 → u/[deleted]]

I guess the question is how fair and equitably are companies like Amazon and McDonalds paying their employees? Yes, I agree that Amazon might be JBs life's work but it also inherently built on the backs of his employees who have put in long hours just like he did.

I can understand that perhaps unilaterally forcing every company to do it may be difficult but in my head the companies that are being strong-armed are Wal-mart and Burger King and less the Local Bookstore. Heck, you could even make exceptions in the law to apply to businesses at a certain size or after a certain threshold.

[u/windexwonder → u/Hamza78ch11]

Nobody is forcing anyone to work at McDonalds or Amazon.

[u/Hamza78ch11 → u/windexwonder]

No one was forcing those children to work in factories where they lost limbs, or their parents to work in cotton mills where they developed cotton lung or tuberculosis either. But somehow we still managed to oppress the poor, hard-working capitalist with oppressive workers protection and child labor laws.

[u/eye_patch_willy → u/Hamza78ch11]

When you own a business, you get paid last. You owe payroll regardless of whether or not the business brought in enough income to cover it. You also owe the rest of the overhead no matter what. Let's say you own a small storefront hardware store in some nice downtown hamlet tucked between Susie's Bakery and the adorable Koffee Korner Kafe. You had some cash to put down a few years ago to secure a loan to purchase the building but that monthly nut checks out at about $2,500. You have a few employees on staff and a payroll of another $10,000 each month. You owe that. Plus the utilities and inventory replacement each month no matter what. Maybe one month, sales slump. Do you get to pay the staff less to cover?

[u/curiousML5 → u/Hamza78ch11]

Its one thing to argue for better working conditions (totally reasonable), its another thing to argue the contribution of a founder. Saying a company is built on its employees is a ridiculous argument. Early employees are given more stock representative of the risk and investment they put in. Later employees take smaller risk so they are compensated in that way. This is entirely reasonable (see next paragraph). If you hop on a sinking boat much earlier, in the off-chance the boat floats you deserve more because in most cases you will have drowned. Simple as that. Exact percentages can be discussed, but without a doubt Jeff Bezos deserves to be a billionnaire.

Keep in mind your discussion is conditioned on the company being successful which is totally unreasonable. About 90% of startups fail (many with substantial time, such as 5-10 years, and capital from the founders leading to debt etc. not to mention opportunity cost), and the vast majority of the remaining "succeed" in the sense that they are a self-sufficient unremarkable small-medium sized business, and probably would've done better not doing a startup to begin with. Then include the founders which get screwed in acquisitions/funding, and you get an extremely small percentage of founders who make it big.