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The attempt is commendable, but the agency problem is well understood and none of these alternative structures have really solve for it.
by manquer 2y ago
The attempt is commendable, but the agency problem is well understood and none of these alternative structures have really solve for it.
- esperent 2y ago> the agency problem is well understood What is "the agency problem"?
- manquer 2y agoVery generally it is (https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble... ) about the conflict of interest between agent( people taking action) and principal (the entity or person on behalf of whom action is taken) In modern management compensation theory (https://saylordotorg.github.io/text_introduction-to-economic-analysis/s20-agency-theory.html https://saylordotorg.github.io/text_introduction-to-economic... ) this is key to why executive compensation has increased much faster than workers in the last 50 years. Stock based compensation mix evolved from this thesis, and quite common in the valley and why almost all OpenAI staff wanted Sam Altman back even though the non profit board did not. Aligning key talent's compensation to enterprise value is only viable in unrestricted for profit entities any other structure with limits (capped profit, public benefit corporation, non profit, trust, 501c's etc) does not work as well. Talent will then leave to a for-profit entity who can offer better compensation than a restricted entity can because they share a % of their enterprise value which restricted ones either cannot or not have same liquidity/value [1] etc. --- [1]This is why public companies are more valuable for RSU/options than private companies, and why cash flow positive companies like Stripe still raise private money to just give liquidity to employees .