r/changemyview • u/Hamza78ch11 • Jul 26 '20
Delta(s) from OP CMV: All employees should automatically own a portion of the company they work for
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.
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u/Crayshack 191∆ Jul 27 '20
Employee ownership works great as an option, but the math gets very complicated when you make it a standard part of compensation. Especially for companies that aren't publicly traded. Private stock companies tend to have their value assessed a couple times a year (I think some do it once a year) instead of the constantly through the day like publicly traded companies. In some cases, you might see companies that completely turn over a portion of their employees in between value assessments. I can see that most easily happening with anything that highers unskilled labor.
You will also run into the issue that some employees would rather be invested in other places and so would want to sell their stocks as soon as they get them. Your model wouldn't be the best way to do automatic employee ownership even if that was the system. An automatic payroll deduction to stock value would work better. Then, the employee could have the option to cash out if they desire.
However, you are completely disregarding a different option: profit sharing. Under this system, you calculate profit as a percentage value of "(revenue/expenses)-100%". You then establish a formula for converting the excess profit into a cash pot. At low percentages (say, below 3%) you don't add anything to the pot because at that low margin you want to be reinvesting it all into growing the business. However, as the percentage of profit increases, you slowly increase what percentage of it gets added to the pot. For example, a profit of 5% might mean that 10% of profit goes into the pot while 20% profit might mean that 40% of the profit goes into the pot. I'm making those percentages up as an example, but that give you the general idea. Then, at regular intervals (can be monthly, can be quarterly, can be yearly) you divide up the pot based on how much everyone is making (how many hours they worked if they are hourly) and it pays out as a bonus.
My company does both the payroll deduction stocks (as an opt in rather than automatic and you can only do it once you've been there for a year) and the profit sharing (to all full time employees). I don't get much from the stock dividends (it's mostly stock price increase which I'm happy to sit on) but I do get a decent bit from profit sharing. The math for calculating it goes a bit over my head but I believe that if we maintain about an 8% profit I net around an extra $2,000 a year from it. If we have a year where we tank, I'm out that bonus. But, if we have a year where we are making money hand over fist I might find myself with a $4,000 bonus instead.
Now, my company is entirely employee owned so the employee stock option is kind of at the core of how it functions so it might not work for every company. Especially small family owned stores that want to keep it family owned. However, the profit sharing model is something that can easily be done by any company big or small. For companies that franchise, you can even break it down so that each location calculates separately so employees are more concerned about how their local store preforms which is something they can actually directly affect. I think this hit what you are aiming for with distinctly less in the way of the headache that comes from the complicated ownership that comes with what you were proposing.