I don’t know the full history of corporate shenanigans, but it’s my understanding that the beginning of it all was to help form businesses that no individual could afford to start. No single person should reasonably have the funds to build a factory with all of the expensive equipment and parts needed to make cell phones. So you get people together who think cell phones are a good idea, they all pitch in, and now you can afford to build it and they get to share in the profits when it succeeds.
I like the employee-owned idea, but it seems like it would be hard to get off the ground in industries that require huge upfront investments. Imagine you want to build a grocery store, but the land and the building and the initial stock all takes money so you have to ask the cashier for $10,000 up front before you can actually build the thing and later start paying them. I legitimately don’t know, are there proposed ways to build these businesses but make them employee-owned?
Financing is one of the major hurdles of employee owned businesses trying to compete against investor owned businesses, so you’re right to identify that. I have 4 main solutions to this problem:
Investment isn’t the only way to raise capital. There’s also loans. In a fully co-op economy, the financial infrastructure for loans would likely be more robust. This is already how a lot of businesses get off the ground.
A company doesn’t have to be 100% employee owned for the employees to have a controlling stake. An employee-owned company could decide to sell off 49% of its value to raise capital. They could do this at any time, including during startup.
The average worker would have more money to do as they please. In 2023, American companies earned a profit of $22k per worker. In a co-op economy, that’s an average of $22k each worker has control over that they currently don’t. Your average worker would be more capable of making the type of investment that you described.
Companies don’t necessarily have to start as employee owned. A normal path for an entrepreneur is to start a business, grow it until it’s sustainable and later sell it to somebody. Instead of selling it to an investor, they could sell it to their employees. In a co-op economy, this would probably be required in some way or another.
Completely agree. My wildest fantasy would be a phase in of co-ops/employee owned companies. This could be done over a 10 year period with each year requiring 5 more percent of the company value be owned equally by the employees (judged by the employee with the lowest stake). By the end of that decade, employees would own a controlling stake in their employers and would have plenty of time to organize a method of governance.
There’s one critical metric that I think would determine how easily a company could make this transition: (total company value)/(2 x total company payroll). A $1M company with a $500k payroll would require each employee to pay an entire year’s salary for them to have a controlling stake. That’s very achievable over a 10 year period without really even having to give the ownership to the employees. The owners could just sell it off to them.
With this metric in mind, the companies that would transition the best would be ones that pay their employees very well relative to company value. Something like a small welding shop with a high number of skilled employees might be able to do this easily. A tech company with huge valuation relative to the number of employees would be forced to offer aggressive stock buying programs for employees (for every share you buy, the company matches 10 shares for example). This would force companies that don’t pay well to either buy back stock, issue new stock, or drastically increase their payroll to make the transition.
I think that limited stocks are OK and appropriate. What I really have a problem with is people betting on failure in the stock market. That should never be allowed.
That can also work with stocks, every employee gets a share. Much easier to set up and manage, compared to making every employee a member of the LLC or a partner.
I hate the idea is stocks. Ownership of companies should be split equally between all employees.
I don’t know the full history of corporate shenanigans, but it’s my understanding that the beginning of it all was to help form businesses that no individual could afford to start. No single person should reasonably have the funds to build a factory with all of the expensive equipment and parts needed to make cell phones. So you get people together who think cell phones are a good idea, they all pitch in, and now you can afford to build it and they get to share in the profits when it succeeds.
I like the employee-owned idea, but it seems like it would be hard to get off the ground in industries that require huge upfront investments. Imagine you want to build a grocery store, but the land and the building and the initial stock all takes money so you have to ask the cashier for $10,000 up front before you can actually build the thing and later start paying them. I legitimately don’t know, are there proposed ways to build these businesses but make them employee-owned?
A group with access to a lot of capital that it makes sense to invest in companies making products… the government?
Financing is one of the major hurdles of employee owned businesses trying to compete against investor owned businesses, so you’re right to identify that. I have 4 main solutions to this problem:
Investment isn’t the only way to raise capital. There’s also loans. In a fully co-op economy, the financial infrastructure for loans would likely be more robust. This is already how a lot of businesses get off the ground.
A company doesn’t have to be 100% employee owned for the employees to have a controlling stake. An employee-owned company could decide to sell off 49% of its value to raise capital. They could do this at any time, including during startup.
The average worker would have more money to do as they please. In 2023, American companies earned a profit of $22k per worker. In a co-op economy, that’s an average of $22k each worker has control over that they currently don’t. Your average worker would be more capable of making the type of investment that you described.
Companies don’t necessarily have to start as employee owned. A normal path for an entrepreneur is to start a business, grow it until it’s sustainable and later sell it to somebody. Instead of selling it to an investor, they could sell it to their employees. In a co-op economy, this would probably be required in some way or another.
Completely agree. My wildest fantasy would be a phase in of co-ops/employee owned companies. This could be done over a 10 year period with each year requiring 5 more percent of the company value be owned equally by the employees (judged by the employee with the lowest stake). By the end of that decade, employees would own a controlling stake in their employers and would have plenty of time to organize a method of governance.
There’s one critical metric that I think would determine how easily a company could make this transition: (total company value)/(2 x total company payroll). A $1M company with a $500k payroll would require each employee to pay an entire year’s salary for them to have a controlling stake. That’s very achievable over a 10 year period without really even having to give the ownership to the employees. The owners could just sell it off to them.
With this metric in mind, the companies that would transition the best would be ones that pay their employees very well relative to company value. Something like a small welding shop with a high number of skilled employees might be able to do this easily. A tech company with huge valuation relative to the number of employees would be forced to offer aggressive stock buying programs for employees (for every share you buy, the company matches 10 shares for example). This would force companies that don’t pay well to either buy back stock, issue new stock, or drastically increase their payroll to make the transition.
I think that limited stocks are OK and appropriate. What I really have a problem with is people betting on failure in the stock market. That should never be allowed.
That can also work with stocks, every employee gets a share. Much easier to set up and manage, compared to making every employee a member of the LLC or a partner.