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Or in this case, the money could end up in the bank accounts of all the employees they are letting go instead. That doesn't sound like a bad plan to me. I get

Or in this case, the money could end up in the bank accounts of all the employees they are letting go instead. That doesn't sound like a bad plan to me. I get that investors want returns for their capital, but expecting employees to take all of the heat while shielding investors from any of it seems quite cynical.

Nasrudith 6y ago
That isn't the employee's money by definition - when it was sold as equity it became the shareholders. Just giving it away would be embezzlement just as much as if the CEO decided to have it resting in their account. Thus there needs some sort of purpose for the spending. Without any sort of equity based compensation the relationship with employees is inherently transactional - only getting more money if they think there is some sort of return from it be it reduced turnover, better performance, or as a way to attract new talent. If you want employees to gain in that situation you need a worker owned coop, there is nothing making such a thing illegal although historically it usually hasn't scaled as well for several reasons and the inaccessibility of the equity to employees and lack of guarantees means the default assessment for that value in new ventures is $0 to the employee.
- evancox100 6y ago
  I was going to go into the idea of employee-owned co-ops as a possible solution, but my post got too long. I think this is on the right track. It doesn’t have to be a binary choice between either 100% investor-owned or 100% employee-owned. You could have a for-profit corporation with profit-sharing, where employees are entitled to maybe 25% of the profits, etc.
evancox100 6y ago
Right so my comment was just in the context of GP’s argument against returning 100% FCF to investors, because any money given to employees as wages or severance wouldn’t be a part of FCF I’m the first place. The real argument we should be having is whether workers are getting paid enough, which I think is what you’re getting at. I believe the answer for low- to medium-skill workers is no for a variety of reasons. I have less concern for highly-compensated, high-skill tech employees from IBM or TI. Also, I think if we made businesses shut off all returns to investors whenever they lay people off, like some seem to be suggesting, we would have many more contractors/short-term employees, with more workers in precarious employment situations. There is some empirical evidence for this in Europe. Instead of blocking the return of profits, I would instead argue for increased taxation of corporations and middle-/high-income earners in order to provide a stronger social safety net, in the event they are let go they are not destitute and starving. But also happy to hear arguments for other solutions, it’s obviously a complex topic with lots of interconnected pieces.

Nasrudith 6y ago

That isn't the employee's money by definition - when it was sold as equity it became the shareholders. Just giving it away would be embezzlement just as much as if the CEO decided to have it resting in their account. Thus there needs some sort of purpose for the spending. Without any sort of equity based compensation the relationship with employees is inherently transactional - only getting more money if they think there is some sort of return from it be it reduced turnover, better performance, or as a way to attract new talent. If you want employees to gain in that situation you need a worker owned coop, there is nothing making such a thing illegal although historically it usually hasn't scaled as well for several reasons and the inaccessibility of the equity to employees and lack of guarantees means the default assessment for that value in new ventures is $0 to the employee.

evancox100 6y ago
I was going to go into the idea of employee-owned co-ops as a possible solution, but my post got too long. I think this is on the right track. It doesn’t have to be a binary choice between either 100% investor-owned or 100% employee-owned. You could have a for-profit corporation with profit-sharing, where employees are entitled to maybe 25% of the profits, etc.

evancox100 6y ago

Right so my comment was just in the context of GP’s argument against returning 100% FCF to investors, because any money given to employees as wages or severance wouldn’t be a part of FCF I’m the first place. The real argument we should be having is whether workers are getting paid enough, which I think is what you’re getting at. I believe the answer for low- to medium-skill workers is no for a variety of reasons. I have less concern for highly-compensated, high-skill tech employees from IBM or TI. Also, I think if we made businesses shut off all returns to investors whenever they lay people off, like some seem to be suggesting, we would have many more contractors/short-term employees, with more workers in precarious employment situations. There is some empirical evidence for this in Europe. Instead of blocking the return of profits, I would instead argue for increased taxation of corporations and middle-/high-income earners in order to provide a stronger social safety net, in the event they are let go they are not destitute and starving. But also happy to hear arguments for other solutions, it’s obviously a complex topic with lots of interconnected pieces.