
When Workers Own Their Companies, Everyone Wins - smacktoward
http://www.newrepublic.com/article/118933/economic-benefits-coop
======
consz
I believe this is one of the big reasons I chose to go towards trading instead
of working in SV. The prop trading companies (and even big finance firms like
Goldman) have _far_ more egalitarian profit-sharing structures than places
like e.g. Google or Facebook, and you can really see that employees of those
trading firms are a lot more motivated in their work than a programmer at a
typical SV firm (even at startups that I've seen).

~~~
asdfologist
I don't think so. Yes, you do get paid more, but you're expected to put in
more hours and forced to work within a much more rigid environment with less
transparency. Also, throughout finance firms (even among the more tech-saavy
ones), the programmers are ostensibly considered second-class to the portfolio
managers, and this is reflected in the pay.

So yes, they get paid more, and as a result they may be more a bit more
motivated, but there's nothing egalitarian about programmer pay on Wall
Street.

~~~
consz
I'm much more quant than programmer, but even programmers at trading companies
get paid at least as well as they do at Google/Facebook (and obviously much
better than they'd be paid at a startup) to start with. Not to mention that
programmers at SV companies are second class to product managers, so the
relative status situation isn't that different.

I don't know where you get the more hours/more rigid attitude from. 9hrs is
very typical, weekends are _very_ rare, and the only time you ever exceed that
is when you are releasing very new strategies -- strategies which you get a
_direct_ cut of the PnL, so you have a very direct incentive to want to get
that out there and trading as soon as you can.

Is everyone equal in finance? No. But compared to working in the valley? It's
worlds apart. Let's look at a simple example, for Google and Goldman, take a
look at average revenue per employee (~1.2m for both) vs. average compensation
per employee (600k for GS, ~150-200k for Google). In what way are Google
employees not getting screwed over? Prop trading firms have even flatter
structures than Goldman.

~~~
asdfologist
"600k for GS, ~150-200k for Google" is a meaningless comparison. First of all,
the 600k is mean, not median, and it's heavily skewed by the relatively few
but very high MD/partner salaries. Second, that's across the entire firm, and
the GS tech guys are pretty far down the totem pole when it comes to pay. I
doubt there's much difference in median programmer pay in GS vs Google,
especially recently given the rise in SV salaries.

And if you're a quant, then it's totally not fair to compare yourself against
a programmer, because even if you're doing programming, it's a completely
different job altogether. Quant jobs (the ones immediately touching the
models) are much more statistics focused, and the coding is more a means more
than an end.

~~~
consz
What job is there that coding isn't a means to an end?

------
up_and_up
Here is a list of the largest majority employee-owned companies in the USA:
[http://www.nceo.org/articles/employee-
ownership-100](http://www.nceo.org/articles/employee-ownership-100).

That is companies that are >50% employee owned.

Companies marked with an asterisk are 100% employee-owned.

The biggest 100% employee-owned company is Lifetouch Photography in MN with
25,000 employees.

But Co-ops and employee owned companies are not the same thing.

I have worked for several small co-ops that used consensus decision making.
While it is true that everyone has an equal voice the tendency is to listen
more to people with more experience or expertise in the particular area being
discussed. Also, there is a lot of delegation that happens where subgroups are
formed so not everyone is deciding what type of toilet paper to buy or how
exactly we should implement some minor detail. That being said sometimes
random people come up with the best ideas, so it was helpful to have them
involved.

I found consensus decision making to be a lengthy process but a rewarding one.

~~~
specialist
Consensus decision making is like QA: they can help make sure you're solving
the right problem.

The upfront effort often feels inefficient -- especially if the team is lost
in the weeds -- but can save a lot of heartache.

I've used various group decisions making processes to great effect. Joint
application development (JAD) sessions for project kickoffs (scope setting).
Approval voting for triage (issues with most votes get solved first). Roman
evaluation (thumbs up/down) for acceptance testing. Story telling for post
mortems. Etc, etc.

I've also seen much wasteful decision making. I'm not smart, or yet
experienced, enough to identify the qwan that makes certain teams rock and
others fail.

------
nraynaud
I think the article does a poor job of explaining why factories are generally
not coop. When you have 1 employee = 1 vote, you can't sell (a significant
amount of) capital to external entities. This leaves you with borrowing money,
for which you can't use a significant amount of capital as a collateral.

That leaves the coops mostly to sectors that are not capital intensive (mostly
service and retail).

There is a bit of a trend currently in France around employee-owned companies.
One of the most visible is a restaurant in Paris ("le Temps des Cerises", we
know we're in dangerous communist territory just by the name).

I know a coop where the employees/owners take personal credits to buy the
headquarters.

~~~
asgard1024
Yes, that's a big problem. The owners of capital want to have a say about what
the company does, because their money are at stake.

Perhaps this is just a cultural thing though. Take money lending - although a
bank gives capital to someone else in exchange for profit, it doesn't require
strict controls over the actual use of the money; it relies on contract law to
get the money back.

Similarly, the executives of the publicly traded companies have responsibility
to shareholders. Perhaps a similar agreement could be institutionalized with
the coops too (yet preserve their democratic nature).

~~~
nraynaud
For the lending, there will often be a collateral, for a company it will often
be shares. That limits the leverage to 50% since a default will make the bank
an investor and external investors can't have control.

The collateral will not always be shares, sometimes it could be the acquired
physical good, then it's accessible to coops (too bad if you want to borrow
for service or immaterial goods). Using real estate or company planes as a
collateral suggests that you already got a credit to acquire them in the first
place.

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KonoHito
It sounds like an attractive concept... but I'm not sure about its long term
viability.

The larger a business grows, the more people become involved in the
cooperative, and the harder it becomes to gain consensus or propose more risky
but sometimes critical actions for the business.

Layoffs are most probably off the table, while things like employee benefits
will probably become disproportionately popular and hard to cut. Furthermore
the whole "own your company" appeal seems to become less of a big deal as more
and more join the coop, and you get less of a say over how the company should
be run. But conversely it is usually on a large scale that the financial
benefits of minority shares ownership can yield decent returns. Seems a bit
conflicting.

I've heard some groceries in US converted to co-op model though. Wonder how
they are doing now.

~~~
up_and_up
> I've heard some groceries in US converted to co-op model though. Wonder how
> they are doing now.

One example is Woodman's in the upper midwest:
[http://en.wikipedia.org/wiki/Woodman's_Markets](http://en.wikipedia.org/wiki/Woodman's_Markets)

They have 15 locations and over 1 billion in annual revenue.

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Htsthbjig
I am from Spain and used to work with cooperatives like Mondragon group in the
North and lots of small agricultural coops in the south.

It is not paradise, but somewhat it works. It is not for everyone, everybody
is the same and you have consensus lock when taking decisions.

About unions relationship, well for me they have nothing to do. Everything
changes when the workers own a part of the company, nothing to do with Big
Unions on Big Companies or Government.

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bgilroy26
[http://en.wikipedia.org/wiki/Employee_stock_ownership_plan](http://en.wikipedia.org/wiki/Employee_stock_ownership_plan)

My favorite employee owned business is King Arthur flour. I think it's a
wonderful thing when a company is owned by people who are part of the day-to-
day meat and potatoes of the business.

------
gojomo
Coops & employee stakes have worked a lot of places, and should be tried more
often – but it's clearly not best for everywhere, all the time, or it'd
already be a universal practice.

United Airlines became majority employee-owned in 1994 –
[https://en.wikipedia.org/wiki/History_of_United_Airlines#Emp...](https://en.wikipedia.org/wiki/History_of_United_Airlines#Employee_Stock_Ownership_Plan)
. Was it the best airline by any measure from then, until its 2002 bankruptcy?

Chrysler was majority-owned by a UAW retirement trust for a period starting in
2009... until Fiat finished buying out that stake earlier this year. Was
2009-2014 an "everybody wins" period for Chrysler?

------
barry-cotter
I'm sure these companies are more humanely managed and have happier employees
but I doubt they're economically efficient. If they were they'd outcompete non
employees owned companies. We even have an entire sector of employee owned
companies where they obviously do win consistently, professional services
firms like accountancy (PWC, KPMG, Deloitte, Ernst & Young) or management
consulting (McKinsey, Bain, BCG). All the MC firms reserve equity for partners
after an up or out process which takes about seven years. Most people never
get equity. Accounting firms don't have up or out but there are still partners
and non-partners.

What's particularly damning about the efficiency/survival value of employee
ownership is that all the (then) Big 5 accounting firms threw off IT project
management/procurement firms, all of which were/are normal companies.
Accenture os all that's left of Arthur Andersen. It doesn't have partners
except the way Goldman Sachs has "partners".

If you want more humanely managed companies mandate it for everyone because
employee owned companies lose, consistently.

~~~
rmc
You're presuming a perfect market where the most economically efficient
organisation will win. There is no guarantee that our current economy is like
that.

~~~
barry-cotter
ADBOC. This is like the efficient market hypothesis, the strong version is
wrong and the weak version is so weak as to be almost tautological. In a
perfect market the most economically efficient organisation would win, end of
story. What we've got isn't that but it's an approximation thereof. The closer
it gets to fulfilling all the conditions the more likely it is that the
outcome is economically efficient.

The only economy I'm aware of that had a lot of employee owned cooperatives
was Yugoslavia. It worked better than Soviet bloc communism as far as resource
allocation and living standards went but not as well as capitalism.

Co-ops don't expand as much as privately or publicly held firms because they
maximise something approximating profit per worker whereas normal firms
maximise straight profits. I think I picked up that argument from Paul
Krugman. It's been a long time since I read the argument so I may be
misremembering but he used Harvard and the UC systems as examples. Harvard
doesn't expand its student body, this maximises faculty utility, the UC system
does, this maximises student utility. The article even mentions that worker's
co-ops have higher profitability than normal firms.

~~~
michaelochurch
_Co-ops don 't expand as much as privately or publicly held firms because they
maximise something approximating profit per worker whereas normal firms
maximise straight profits. I think I picked up that argument from Paul
Krugman._

r- and K-selection. Companies like Google and Microsoft, which grew large at
the cost of culture, are r-selective. Valve and Github, which grow more slowly
while maintaining open allocation and cultural health, are K-selective.

It seems impossible, in the long run, to be K-selective if you take venture
capital. You're now controlled by people with the attention spans of five-
year-olds.

------
corford
In the UK, employee or customer owned businesses are a mixed bag. We have some
very good ones (John Lewis, Nationwide) and some bad ones (the Co-op group).

I think whether or not a business is employee owned is less important for
success than it having a good and capable management team.

~~~
Joeboy
> We have some very good ones (John Lewis, Nationwide) and some bad ones (the
> Co-op group).

The co-op group was a good one for a century and a half, but went astray in
the last few years.

Edit: For those unfamiliar, the story of Co-op bank chairman Paul Flowers is
good lurid fun.

[https://en.wikipedia.org/wiki/Paul_Flowers_%28banker%29](https://en.wikipedia.org/wiki/Paul_Flowers_%28banker%29)

------
ExpiredLink
Coop models may work if decision-making structures are defined clearly and
'economically'.

>> _expand the coop model by associating it more closely with unions._

A receipt for disaster. Some European states had this models in the past and
completely abandoned them.

~~~
Certhas
Care to elaborate? Unions function differently in different EU states: In the
UK they were pretty much killed, in France they act as antagonists to the
business side, in Germany they act more collaboratively with the business
side.

In the latter case in Germany every large enough commpany has to have a
democratically elected workers council, that gets a seat on the board. While
not the same as co-ownership, this democratic co-determination is arguably one
of the more important reasons why labor relations in Germany are much better
than in other European countries.

~~~
stygianguest
France also has democratically elected woker councils. It's no guarantee for
succes.

France on the other hand has had a minimum wage for a long time and a 35 hour
work week. To me it isn't so clear who is doing a better job.

But clearly French unions are not afraid of confrontation.

~~~
legulere
Germany didn't need a minimum wage because of the strong unions. Now that they
lost much power minimum wage is needed. This is also why there's no big push
for minimum wage for instance in Denmark or Sweden, because the unions still
work there.

------
known
Profits should be shared with employees along with share-holders.

------
michaelochurch
_But about 47 percent of American workers participate in profit-sharing
arrangements of some sort. Employee stock ownership plans (ESOPs), for
instance, involve around 10 million workers_

Most of those programs are junk, it's worth noting. That's true, even in the
Valley, where 0.05% (vesting over 4 years, with nothing gained if the company
decides to cliff you) of a 100-person company is typical for a "mere"
engineer.

The term I like is "checkbox equity". It's just offered so the company can
say, "we offer stock options" on its website. It means absolute jack shit. Far
from making you a partner in the company, it has the opposite effect. It's an
excuse not to offer raises and to demand unreasonable sacrifice. It's a
mediocre equity program that exists just to check off the box. To that I say:
fuck you, pay me.

I would rather not have the equity (which is almost always insultingly low)
and just get a fair wage. Let's just be honest here. I'm going to be a
mercenary unless you give me a legitimate reason not to be, and 0.03% of a
200-person company is 0.06 of a person's labor, which is just _not_ enough to
make me give a shit about anything other than my own career. So I won't, and
that should be socially acceptable.

The purpose of these Valley startups' equity programs is to encourage a
tyranny of the masses, and make the honest mercenary attitude socially
unacceptable (allowing the employees to be plundered by the _dis_ honest
mercenaries at the top).

------
jackweirdy
How hard must they have tried to write that without using the word Marxism!?

~~~
throwaway902i
It isn't Marxism. One of the most well-known advocates of employee-owned
companies, Noam Chomsky, is anarchist, not Marxist. Marxism is primarily about
controlling political power to achieve economic goals. What the article talks
about works without (much) political power.

~~~
ageek123
I hate to break the news to you but Chomsky is a Marxist.

~~~
grumanin
What's your argument/evidence for that claim? Chomsky has self explicitly said
numerous times that he's not a Marxist and prominent Marxists don't consider
him to be one of them...

