3 ms·

Corporations have to answer to the board. The board acts in the interests of investors/stakeholders and will eventually have to deal with 'extracting value' fro

Corporations have to answer to the board. The board acts in the interests of investors/stakeholders and will eventually have to deal with 'extracting value' from the company to meet short-term investor demands at the expense of long-term sustainability. To make matters worse, the CEO/board can justify higher levels of compensation if they greatly expand the size/scope of the company. Whether or not the growth matches the market trends. Just look to all the comments of employees complaining how their job is to warm a seat and/or maintain excess/unnecessary administration overhead. The exception are companies like Facebook that refuse to cede decision making to the board. It pisses off investors when the company fails to extract value at a rate matching investor expectations but I bet FB will fare much better in the long-term. Unlike companies like Yahoo/IBM that morphed into pump-and-dump chop shops of underutilized talent.

Fiahil 11y ago
I bet it would be drastically different if the employees were the stakeholders.
- EvanPlaice 11y ago
  Isn't that what venture capital supposedly promises. Workers who are vested in the company are hyper-motivated to see it succeed. In theory, it's a great idea. Who wouldn't love to be an early employee of the 'next Microsoft' and win the successful business lottery? In practice there are some very serious caveats: 1. Non-preferred stock may be rendered worthless after multiple rounds of seed funding. 2. Some stock come with additional restrictions. Such as requiring the person to maintain employment for an extended period of time. 3. Many can't afford the tax costs that come with exercising their options when they get the chance. 4. In some cases you may end up with a net negative of stock earnings after paying the taxes. 5. Exercising early can help avoid some of the tax pain but then you're essentially betting on the future success of a company with a high risk of failure. Basically, working for a startup at significantly below market salary is joining the game of high stakes poker for the rich. Except, unlike poker the game comes with a minefield of additional risks. If the employees were 'true' stakeholders working as a partnership then everybody wins. Unfortunately, that very rarely happens and sometimes relationships go sour during the death march to potential success. When money is involved, the only thing that guaranteed is that people will play fucky fuck games for an advantage if they think they can get away with it.

Fiahil 11y ago

I bet it would be drastically different if the employees were the stakeholders.

EvanPlaice 11y ago
Isn't that what venture capital supposedly promises. Workers who are vested in the company are hyper-motivated to see it succeed. In theory, it's a great idea. Who wouldn't love to be an early employee of the 'next Microsoft' and win the successful business lottery? In practice there are some very serious caveats: 1. Non-preferred stock may be rendered worthless after multiple rounds of seed funding. 2. Some stock come with additional restrictions. Such as requiring the person to maintain employment for an extended period of time. 3. Many can't afford the tax costs that come with exercising their options when they get the chance. 4. In some cases you may end up with a net negative of stock earnings after paying the taxes. 5. Exercising early can help avoid some of the tax pain but then you're essentially betting on the future success of a company with a high risk of failure. Basically, working for a startup at significantly below market salary is joining the game of high stakes poker for the rich. Except, unlike poker the game comes with a minefield of additional risks. If the employees were 'true' stakeholders working as a partnership then everybody wins. Unfortunately, that very rarely happens and sometimes relationships go sour during the death march to potential success. When money is involved, the only thing that guaranteed is that people will play fucky fuck games for an advantage if they think they can get away with it.