What passes for capitalism today is utterly unlike that which Henry Ford, for example, advocated and put into practice.
http://www.businessinsider.com/business-and-the-economy-2013-7
QuoteIf you watch TV, you'll be led to believe that the problem with the U.S. economy is that one political team or the other is ruining the country.
A sharp drop in government spending this year is, in fact, temporarily hurting economic growth, but that's not the real problem.
The real problem is that American corporations, which are richer and more profitable than they have ever been in history, have become so obsessed with "maximizing short-term profits" that they are no longer investing in their future, their people, and the country.
This short-term corporate greed can be seen in many aspects of corporate behavior, from scrimping on investment to obsessing about quarterly earnings to fretting about daily fluctuations in stock prices. But it is most visible in the general cultural attitude toward average employees.
Employees are human beings. They are people who devote their days to creating value for two other groups of people: customers and shareholders. And, in return, at least in theory, they are people who share in the rewards of the value created by their team.
In theory.
In practice, American business culture has become so obsessed with maximizing short-term profits that employees aren't regarded as people who are members of a team.
Rather, they are regarded as "costs."
And "costs," as we all know, are supposed to be reduced as much as is humanly possible (except the "costs" of the salaries of senior management and investors--those are supposed to be increased).
This view of employees was expressed succinctly yesterday by a Twitter user named Daryl Tremblay, who was appalled by the suggestion that McDonald's should increase the wages of its restaurant workers and pay for this by making a bit less money. (I was arguing that McDonald's employees should not be treated as "costs," but instead as valuable members of a successful team who shouldn't have to work that hard and still live in poverty.)
Here was Daryl's response:
They are costs. Full Stop. They don't have a stake, they hold nothing. They trade their labor for money.
— Daryl Tremblay (@DarylT) July 30, 2013
Now, Daryl is hardly alone in this view. Most senior managers and owners of big American corporations think this way these days. They regard the human beings they work with--the human beings who create the value that pays their salaries--as "costs" to be reduced to create "maximized earnings." Because "maximized earnings," it is now frequently said, is the only thing that any business owner or manager should care about.
Whenever you suggest to folks like Daryl that it doesn't have to be this way, that some companies can and do balance the interests of shareholders with the interests of customers and employees--and, in so doing, create a symbiotic relationship that supports all of these constituencies--folks like Daryl call you a "socialist."
This is a strange insult, because the government has nothing to do with this. But, nevertheless, "socialist" is the label you get branded with if you suggest that the senior managers and owners of America's corporations should share more of their vast wealth with the employees who create it.
This view of capitalism is that it is a sort of Lord-Of-The-Flies economic system in which the only consideration should be "every man for himself." In this style of capitalism, leaders do not manage teams and organizations in a way that creates value for everyone--customers, shareholders, and employees. Rather, in this style of capitalism, a handful of winners extract as much value as they can from hapless losers who don't have the skills, knowledge, or time necessary to "demand a raise" or "go get a better job."
It doesn't have to be this way.
There is no capitalist law that says companies have to view employees as "costs" and pay them as little as possible.
Senior managers and owners can choose to share more of a company's wealth with the people who generate it. They can choose to make only reasonable profits, while still generating compelling financial returns. And they can choose to pay their team-mates living wages instead of viewing them as "costs" and extracting every penny of possible value from them.
If American corporations were struggling to earn money these days, we wouldn't be having this conversation.
But they aren't.
As this chart shows, American corporations have the highest profits and profit margins in history.
American corporations can afford to pay their employees better, hire more employees, and invest more in their future and the country's future.
But American corporations aren't doing that.
Instead, American corporations are choosing to divert as much of their value as possible to their owners and senior managers.
Doing this is not a law of capitalism.
It's a choice.
And it is a choice, unfortunately, that is destroying America's middle class, robbing American consumers (a.k.a., "employees") of spending power, and, ironically, hurting the growth of the same corporations that are making this choice.
If your customers are strapped, your company can't grow.
And, right now, American companies are choosing to impoverish their customers (employees), while skimming off as much wealth as possible for themselves.
This is based on the analysis of a twitter comment?
The economy is working just as it should, fahdizzle.
Quote from: garbon on July 31, 2013, 01:52:25 PM
This is based on the analysis of a twitter comment?
It's based on the analysis of a concept that happens to be expressed succinctly in that twitter comment.
Quote from: fhdz on July 31, 2013, 02:13:28 PM
Quote from: garbon on July 31, 2013, 01:52:25 PM
This is based on the analysis of a twitter comment?
It's based on the analysis of a concept that happens to be expressed succinctly in that twitter comment.
:bleeding:
That may be true for McDonald's-type jobs, but it's not true for most of us. Employees usually need a good amount of training invested in them in order to be productive for the company's purposes. That money spent on training is an investment that brings a return in productivity, and the money spent on salaries and benefits protects the first investment. Now, for low-skilled work with negligible knowledge requirement, I can see where it's more in the cost category. Even Henry Ford had to get his peeps some training and practice before they could pump out as many cars per hour as he was shooting for.
Another thing is companies moving their training investment costs off to the state and selling it to the taxpayers as education. If you can get the state to train your employees for you, then that also contributes to labor becoming a cost only.
Quote from: garbon on July 31, 2013, 02:19:10 PM
Quote from: fhdz on July 31, 2013, 02:13:28 PM
Quote from: garbon on July 31, 2013, 01:52:25 PM
This is based on the analysis of a twitter comment?
It's based on the analysis of a concept that happens to be expressed succinctly in that twitter comment.
:bleeding:
You don't think that sort of thinking is prevalent?
We need more green jobs.
Quote from: MadImmortalMan on July 31, 2013, 02:21:48 PM
That may be true for McDonald's-type jobs, but it's not true for most of us. Employees usually need a good amount of training invested in them in order to be productive for the company's purposes. That money spent on training is an investment that brings a return in productivity, and the money spent on salaries and benefits protects the first investment. Now, for low-skilled work with negligible knowledge requirement, I can see where it's more in the cost category. Even Henry Ford had to get his peeps some training and practice before they could pump out as many cars per hour as he was shooting for.
Another thing is companies moving their training investment costs off to the state and selling it to the taxpayers as education. If you can get the state to train your employees for you, then that also contributes to labor becoming a cost only.
My experience in the job hunt has been that employers are a lot less willing to train than they used to be.
Quote from: MadImmortalMan on July 31, 2013, 02:21:48 PM
Even Henry Ford had to get his peeps some training and practice before they could pump out as many cars per hour as he was shooting for.
Henry Ford had his own vocational school to train his skilled workmen; my Grandfather went to it. It ran through what would have been normal high school years; and the students were introduced to every individual aspect of machine operation, production and the like and they picked a specialty at the end. (My Grandfather was a draftsman.)
The reason he stopped doing that was it was cheaper for Packard to hire a Ford graduate than to start their own academy. :bowler:
Quote from: fhdz on July 31, 2013, 02:27:45 PM
My experience in the job hunt has been that employers are a lot less willing to train than they used to be.
I posted statistics on that weeks ago, something like 75% of companies no longer train employees to any degree. Training costs money, and we can't spend that on employees.
Quote from: fhdz on July 31, 2013, 02:27:04 PM
You don't think that sort of thinking is prevalent?
I think that sort of thinking is ubiquitous. It's there when a person buys toilet paper at Walmart to save 30 cents, or when a person buys a book on Amazon to save $1.50. It's there when a person leaves his current job to go make $200K working in the Ragnorak shale oil fields.
As to Henry Ford, I don't know if his motivation for raising wages to $10/day was altruism/teamwork/stakeholder value (although he does seem to have been kind of a dick as a person, so maybe not), but the upshot was that his workers worked harder than before to hold onto the fantastic wages, resulting in what economists described as an "efficiency wage."
The market solution to the problem you describe is for people with the same attitude as you towards profit and wages to seek out companies which pay their employees more than the market rate, and either give them business or invest in them (accepting a lower return than you would get as a Lord of the Flies). Like fair trade coffee. I also read about a guy who set up a Tshirt factory in the Dominican, pays his workers a living wage(tm) and sells the shirts in college book stores at a $5 premium.
Ford's method was a disruption in the market that both gave him a competitive edge (hence more profit) and also benefited his workers. That's the winning formula.
Would Ford have done that if it did not give him the advantage? No way. What if his major competitors were significantly geographically separated from him in such a way that they were competing in completely different labor markets. What if Ford convinced Wayne State University to pump out dozens of graduates a day with certifications in motor construction and Washington DC to subsidize student loans for them all. He wouldn't have done any training either.
Quote from: Admiral Yi on July 31, 2013, 02:41:16 PM
As to Henry Ford, I don't know if his motivation for raising wages to $10/day was altruism/teamwork/stakeholder value (although he does seem to have been kind of a dick as a person, so maybe not), but the upshot was that his workers worked harder than before to hold onto the fantastic wages, resulting in what economists described as an "efficiency wage."
One of his specific goals was to make sure the people who worked on his cars could have enough money to buy themselves a Ford. It's a pretty clear example of increased wages going directly back into the economy - and not only back into the economy, but into his company as well.
Quote from: fhdz on July 31, 2013, 03:24:32 PM
One of his specific goals was to make sure the people who worked on his cars could have enough money to buy themselves a Ford. It's a pretty clear example of increased wages going directly back into the economy - and not only back into the economy, but into his company as well.
Which he achieved in large part by building cheap cars in what had previously been a luxury toy market for the wealthy. Besides, what modern companies produce products that their employees can't afford? McMansion builders? Yacht makers? Maybe Apple (if you count Foxconn employees as Apple employees) and athletic shoe makers.
Quote from: Admiral Yi on July 31, 2013, 03:41:22 PM
Quote from: fhdz on July 31, 2013, 03:24:32 PM
One of his specific goals was to make sure the people who worked on his cars could have enough money to buy themselves a Ford. It's a pretty clear example of increased wages going directly back into the economy - and not only back into the economy, but into his company as well.
Which he achieved in large part by building cheap cars in what had previously been a luxury toy market for the wealthy. Besides, what modern companies produce products that their employees can't afford? McMansion builders? Yacht makers? Maybe Apple (if you count Foxconn employees as Apple employees) and athletic shoe makers.
I can't afford to purchase a market research study. :(
Quote from: Admiral Yi on July 31, 2013, 03:41:22 PM
Which he achieved in large part by building cheap cars in what had previously been a luxury toy market for the wealthy. Besides, what modern companies produce products that their employees can't afford? McMansion builders? Yacht makers? Maybe Apple (if you count Foxconn employees as Apple employees) and athletic shoe makers.
I sure as hell can't afford my employer's legal services.
Quote from: fhdz on July 31, 2013, 03:24:32 PM
One of his specific goals was to make sure the people who worked on his cars could have enough money to buy themselves a Ford. It's a pretty clear example of increased wages going directly back into the economy - and not only back into the economy, but into his company as well.
McDonald's has done the same thing in a sense, their workers are too poor to eat anywhere else. ;)
Ford was something of an idealist; but he also paid workers more because he wanted a stable (and sober) workforce. Half the $5 a day was a bonus, workers had to be good Americans (by Henry Ford's definition) in order to get the bonus. Immigrants had to learn English and wear American clothes. Women couldn't get the bonus unless they were single and supporting a family. Men whose wives worked outside the home couldn't get the bonus nor could excessive drinkers or gamblers.
It's not just American business culture.
Here short-termism is endemic as well. For example, IT industry in Spain is dominated by a few big players that can outbid anyone else on big contracts. Salaries and conditions for employees are so bad they are collectively known as cárnicas (literally: meat processing factories).
Quote from: Savonarola on July 31, 2013, 03:50:36 PM
Ford was something of an idealist; but he also paid workers more because he wanted a stable (and sober) workforce. Half the $5 a day was a bonus, workers had to be good Americans (by Henry Ford's definition) in order to get the bonus. Immigrants had to learn English and wear American clothes. Women couldn't get the bonus unless they were single and supporting a family. Men whose wives worked outside the home couldn't get the bonus nor could excessive drinkers or gamblers.
Ford raised the wages for assembly line personnel because it was such repetitive work that he was seeing increasingly substantial turnover. Increased wages equals increased retention. Imagine that.
Quote from: CountDeMoney on July 31, 2013, 04:20:52 PM
Ford raised the wages for assembly line personnel because it was such repetitive work that he was seeing increasingly substantial turnover. Increased wages equals increased retention. Imagine that.
That's what I had meant by a stable workforce. Automobile making was no more repetitive than any other sort of factory work, but it did have a learning curve. A high rate of turnover cost Henry Ford money, which is one of the reasons Ford paid twice the going rate.
It's strange to see Henry Ford held up as an paragon of capitalism (though that is a central tenant of Mein Kampf.) As I pointed out Ford paid a bonus to the right sort of worker, and paid the wrong sort of worker the going rate. It was a paternalistic system.
Perhaps CEOs receiving a large part of their compensation in the form of stock options and companies rarely paying dividends encourage short-termism.
???
Not paying dividends seems the exception, not the rule.
Quote from: Admiral Yi on July 31, 2013, 09:53:17 PM
???
Not paying dividends seems the exception, not the rule.
I must be thinking Internet companies (Google, Yahoo, Amazon, etc.). Guess that has less explanatory power, then. Stock options do create perverse incentives, though.
Quote from: Savonarola on July 31, 2013, 02:32:20 PM
Quote from: MadImmortalMan on July 31, 2013, 02:21:48 PM
Even Henry Ford had to get his peeps some training and practice before they could pump out as many cars per hour as he was shooting for.
Henry Ford had his own vocational school to train his skilled workmen; my Grandfather went to it. It ran through what would have been normal high school years; and the students were introduced to every individual aspect of machine operation, production and the like and they picked a specialty at the end. (My Grandfather was a draftsman.)
The reason he stopped doing that was it was cheaper for Packard to hire a Ford graduate than to start their own academy. :bowler:
That's exactly the problem with any kind of training. When you have externalities, even if positive, the resulting investment is suboptimal.
Quote from: fhdz on July 31, 2013, 03:24:32 PM
Quote from: Admiral Yi on July 31, 2013, 02:41:16 PM
As to Henry Ford, I don't know if his motivation for raising wages to $10/day was altruism/teamwork/stakeholder value (although he does seem to have been kind of a dick as a person, so maybe not), but the upshot was that his workers worked harder than before to hold onto the fantastic wages, resulting in what economists described as an "efficiency wage."
One of his specific goals was to make sure the people who worked on his cars could have enough money to buy themselves a Ford. It's a pretty clear example of increased wages going directly back into the economy - and not only back into the economy, but into his company as well.
I've heard that very often, and it hasn't made any more sense with repetition than it did the first time. Simply put, common sense tells you that paying customers to buy your product is not a winning strategy, and more complex analysis confirms that common sense conclusion.
Quote from: Admiral Yi on July 31, 2013, 03:41:22 PM
Besides, what modern companies produce products that their employees can't afford?
Let's see. All of luxury products, for sure. I doubt anyone working at a Mercedes plant or garage could afford their cars. Well, maybe the mechanics, as they are able to repair themselves these pieces of shit.
Aside that... just about any company will subcontract at some point, so technically, they ain't their employee. But still... The guys who made my computer parts probably can't afford them, even if they work 7days a week in their country.
Quote from: Admiral Yi on July 31, 2013, 03:41:22 PM
Which he achieved in large part by building cheap cars in what had previously been a luxury toy market for the wealthy. Besides, what modern companies produce products that their employees can't afford? McMansion builders? Yacht makers? Maybe Apple (if you count Foxconn employees as Apple employees) and athletic shoe makers.
All luxury goods and services. People working at Neiman Marcus will not shop there. People working at the Waldorf Astoria will not sleep there. Etc.
EDIT: Eh, must have missed viper37's post.
Quote from: DGuller on August 01, 2013, 01:12:33 AM
Quote from: fhdz on July 31, 2013, 03:24:32 PM
Quote from: Admiral Yi on July 31, 2013, 02:41:16 PM
As to Henry Ford, I don't know if his motivation for raising wages to $10/day was altruism/teamwork/stakeholder value (although he does seem to have been kind of a dick as a person, so maybe not), but the upshot was that his workers worked harder than before to hold onto the fantastic wages, resulting in what economists described as an "efficiency wage."
One of his specific goals was to make sure the people who worked on his cars could have enough money to buy themselves a Ford. It's a pretty clear example of increased wages going directly back into the economy - and not only back into the economy, but into his company as well.
I've heard that very often, and it hasn't made any more sense with repetition than it did the first time. Simply put, common sense tells you that paying customers to buy your product is not a winning strategy, and more complex analysis confirms that common sense conclusion.
That's clearly why Henry Ford was such a huge failure, I guess.
God, you're an intolerable idiot. :D
Quote from: Admiral Yi on July 31, 2013, 09:53:17 PM
???
Not paying dividends seems the exception, not the rule.
Maybe in 1950, but only until recently would companies rather extend stock dividends than cash dividend payouts; and the only reason cash dividends have shot up recently is because there's no real value in holding on to all that cash companies have accumulated since 2008.
Quote from: fhdz on August 01, 2013, 11:07:49 AM
That's clearly why Henry Ford was such a huge failure, I guess.
God, you're an intolerable idiot. :D
Or maybe that wasn't really his specific goal, or maybe he was right for the wrong reason? Efficiency wage explanation makes much more sense than giving workers money to buy his cars as a profit-boosting strategy.
Quote from: DGuller on August 01, 2013, 11:53:59 AM
Quote from: fhdz on August 01, 2013, 11:07:49 AM
That's clearly why Henry Ford was such a huge failure, I guess.
God, you're an intolerable idiot. :D
Or maybe that wasn't really his specific goal, or maybe he was right for the wrong reason? Efficiency wage explanation makes much more sense than giving workers money to buy his cars as a profit-boosting strategy.
I think you're misinterpreting his goals, or the way he defined success.
Quote from: fhdz on August 01, 2013, 11:57:10 AM
I think you're misinterpreting his goals, or the way he defined success.
Whatever his goals were, or however he defined success, giving people money so that they could (maybe) buy your products is not a transferable lesson. I don't argue that money in common people's pockets may be more beneficial to society and economy than money in corporate vaults, but it would not be more beneficial to the corporation owning that vault.
You can't structure society by expecting entities to act against their self-interest; you instead have to align the incentives for the entities and the entire society. The fact that some entities did choose to act against their self-interest in the past, out of ignorance or out of lack of competition, does not change that pretty basic conclusion in economics.
:lol:
Quote from: DGuller on August 01, 2013, 12:04:05 PM
Whatever his goals were, or however he defined success, giving people money so that they could (maybe) buy your products is not a transferable lesson. I don't argue that money in common people's pockets may be more beneficial to society and economy than money in corporate vaults, but it would not be more beneficial to the corporation owning that vault.
You can't structure society by expecting entities to act against their self-interest; you instead have to align the incentives for the entities and the entire society. The fact that some entities did choose to act against their self-interest in the past, out of ignorance or out of lack of competition, does not change that pretty basic conclusion in economics.
Corporations have self-interest now? I thought they are just legal constructs.
Quote from: Zanza on August 01, 2013, 12:08:50 PM
Quote from: DGuller on August 01, 2013, 12:04:05 PM
Whatever his goals were, or however he defined success, giving people money so that they could (maybe) buy your products is not a transferable lesson. I don't argue that money in common people's pockets may be more beneficial to society and economy than money in corporate vaults, but it would not be more beneficial to the corporation owning that vault.
You can't structure society by expecting entities to act against their self-interest; you instead have to align the incentives for the entities and the entire society. The fact that some entities did choose to act against their self-interest in the past, out of ignorance or out of lack of competition, does not change that pretty basic conclusion in economics.
Corporations have self-interest now? I thought they are just legal constructs.
Its owners do.
The owners are just one of multiple stakeholders of a corporation. Why is their self-interest identical with the self-interest of the corporation?
Quote from: Zanza on August 01, 2013, 12:12:46 PM
The owners are just one of multiple stakeholders of a corporation. Why is their self-interest identical with the self-interest of the corporation?
Because Henry Ford's name was on every vehicle he sold. He also had a controlling interest in the company at the time.
Quote from: Zanza on August 01, 2013, 12:12:46 PM
The owners are just one of multiple stakeholders of a corporation. Why is their self-interest identical with the self-interest of the corporation?
I'm not sure I understand the question. Shareholders are the owners.
Quote from: DGuller on August 01, 2013, 12:04:05 PM
Whatever his goals were, or however he defined success, giving people money so that they could (maybe) buy your products is not a transferable lesson. I don't argue that money in common people's pockets may be more beneficial to society and economy than money in corporate vaults, but it would not be more beneficial to the corporation owning that vault.
You can't structure society by expecting entities to act against their self-interest; you instead have to align the incentives for the entities and the entire society. The fact that some entities did choose to act against their self-interest in the past, out of ignorance or out of lack of competition, does not change that pretty basic conclusion in economics.
This strikes me as short-term thinking. It may be true Ford was not going to get rich directly through some of his employees spending some of their surplus earnings on his cars. However if he can create the idea that the common working man has the ability to own a car that idea will spread beyond his employees and that will definitely profit in the long run.
Quote from: DGuller on August 01, 2013, 12:08:06 PM
Quote from: fhdz on August 01, 2013, 12:07:02 PM
:lol:
Care to expound on that?
I think Ford wasn't looking at it as a one sided affair, as if he could pay his employees enough that they could buy an at that time very expensive luxury item (the car). He was also driving down the cost to make cars so that more people could afford one, effectively expanding his customer base to include his workers.
Quote from: Maximus on August 01, 2013, 12:17:40 PM
This strikes me as short-term thinking. It may be true Ford was not going to get rich directly through some of his employees spending some of their surplus earnings on his cars. However if he can create the idea that the common working man has the ability to own a car that idea will spread beyond his employees and that will definitely profit in the long run.
Somehow I doubt that the only thing keeping the floodgates of workers owning cars from busting open was the lack of examples. In any case, if you want to prime the pump by putting cars into the hands of poor people in a subsidized manner, there are much more efficient ways to do that. After all, the workers could spend that extra $5 an hour of "car money" on something else entirely.
Quote from: DGuller on August 01, 2013, 12:15:06 PM
Quote from: Zanza on August 01, 2013, 12:12:46 PM
The owners are just one of multiple stakeholders of a corporation. Why is their self-interest identical with the self-interest of the corporation?
I'm not sure I understand the question. Shareholders are the owners.
Yes. But the corporation is more than just the capital. It is also e.g. the knowledge and skills and time of the employees. Why is giving a corporation your capital in return for a dividend somehow making you only the only relevant stakeholder in corporate decisions? Why is giving a corporation your time in return for a salary not making you a relevant stakeholder in corporate decisions? The owners are affected by corporate decisions, but so are the employees. Why don't they have a say in corporate governance?
Quote from: Maximus on August 01, 2013, 12:17:40 PM
Quote from: DGuller on August 01, 2013, 12:04:05 PM
Whatever his goals were, or however he defined success, giving people money so that they could (maybe) buy your products is not a transferable lesson. I don't argue that money in common people's pockets may be more beneficial to society and economy than money in corporate vaults, but it would not be more beneficial to the corporation owning that vault.
You can't structure society by expecting entities to act against their self-interest; you instead have to align the incentives for the entities and the entire society. The fact that some entities did choose to act against their self-interest in the past, out of ignorance or out of lack of competition, does not change that pretty basic conclusion in economics.
This strikes me as short-term thinking. It may be true Ford was not going to get rich directly through some of his employees spending some of their surplus earnings on his cars. However if he can create the idea that the common working man has the ability to own a car that idea will spread beyond his employees and that will definitely profit in the long run.
He isn't going to get it, dude. If you can't fit it on a spreadsheet Guller can't wrap his brain around it.
Quote from: DGuller on August 01, 2013, 12:15:06 PM
Quote from: Zanza on August 01, 2013, 12:12:46 PM
The owners are just one of multiple stakeholders of a corporation. Why is their self-interest identical with the self-interest of the corporation?
I'm not sure I understand the question. Shareholders are the owners.
Shareholders are the owners, but the corporation only exists in the first place because of a grant of public authority.
Zanza has a point in questioning what it means to say an artificial legal construct has an "interest". To the extent one can meaningfully talk about such a thing at all, it isn't obvious that such interest merely coincides with the right to control.
Quote from: fhdz on August 01, 2013, 01:01:51 PM
Quote from: Maximus on August 01, 2013, 12:17:40 PM
Quote from: DGuller on August 01, 2013, 12:04:05 PM
Whatever his goals were, or however he defined success, giving people money so that they could (maybe) buy your products is not a transferable lesson. I don't argue that money in common people's pockets may be more beneficial to society and economy than money in corporate vaults, but it would not be more beneficial to the corporation owning that vault.
You can't structure society by expecting entities to act against their self-interest; you instead have to align the incentives for the entities and the entire society. The fact that some entities did choose to act against their self-interest in the past, out of ignorance or out of lack of competition, does not change that pretty basic conclusion in economics.
If it doesn't work on a spreadsheet, it probably doesn't work in economics.
This strikes me as short-term thinking. It may be true Ford was not going to get rich directly through some of his employees spending some of their surplus earnings on his cars. However if he can create the idea that the common working man has the ability to own a car that idea will spread beyond his employees and that will definitely profit in the long run.
He isn't going to get it, dude. If you can't fit it on a spreadsheet Guller can't wrap his brain around it.
Quote from: Razgovory on August 01, 2013, 01:11:20 PM
If it doesn't work on a spreadsheet, it probably doesn't work in economics.
That's actually demonstrably false.
Quote from: Zanza on August 01, 2013, 12:24:02 PM
Yes. But the corporation is more than just the capital. It is also e.g. the knowledge and skills and time of the employees. Why is giving a corporation your capital in return for a dividend somehow making you only the only relevant stakeholder in corporate decisions? Why is giving a corporation your time in return for a salary not making you a relevant stakeholder in corporate decisions? The owners are affected by corporate decisions, but so are the employees. Why don't they have a say in corporate governance?
I think the German model is incredibly sensible here. It's a hard sell in the US, however.
Quote from: DGuller on August 01, 2013, 12:15:06 PM
Quote from: Zanza on August 01, 2013, 12:12:46 PM
The owners are just one of multiple stakeholders of a corporation. Why is their self-interest identical with the self-interest of the corporation?
I'm not sure I understand the question. Shareholders are the owners.
Well not really. It depends on what kind of stock a shareholder owns. Shareholder's in widely held companies have very limited rights - nothing that anyone would confuse as the rights of an owner. Shareholders in closely held companies normally have much more control and something approaching what most people would recognize as a "owner" of something.
Ford had a great deal of control over his company - which was the point being made. It was Ford's own interest that was being reflected. In the absence of a strong controlling shareholder I dont think one can ever really say that a corporation has an "interest" in anything. It is merely a legal construct through which people can invest and hope it is run properly.
Quote from: Zanza on August 01, 2013, 12:24:02 PM
Quote from: DGuller on August 01, 2013, 12:15:06 PM
Quote from: Zanza on August 01, 2013, 12:12:46 PM
The owners are just one of multiple stakeholders of a corporation. Why is their self-interest identical with the self-interest of the corporation?
I'm not sure I understand the question. Shareholders are the owners.
Yes. But the corporation is more than just the capital. It is also e.g. the knowledge and skills and time of the employees. Why is giving a corporation your capital in return for a dividend somehow making you only the only relevant stakeholder in corporate decisions? Why is giving a corporation your time in return for a salary not making you a relevant stakeholder in corporate decisions? The owners are affected by corporate decisions, but so are the employees. Why don't they have a say in corporate governance?
It is possible. After all corporations are nothing but a legal fiction designed to limit the liability of its stock holders. There is no magic rule that states that the Articles of Incorporation of a Corporation cant include a stipulation you are proposing. But that may limit the appeal of the corporation's stock.
Quote from: fhdz on August 01, 2013, 01:01:51 PM
He isn't going to get it, dude. If you can't fit it on a spreadsheet Guller can't wrap his brain around it.
It's that time of the month again, eh? :console:
Quote from: Jacob on August 01, 2013, 01:21:53 PM
Quote from: Zanza on August 01, 2013, 12:24:02 PM
Yes. But the corporation is more than just the capital. It is also e.g. the knowledge and skills and time of the employees. Why is giving a corporation your capital in return for a dividend somehow making you only the only relevant stakeholder in corporate decisions? Why is giving a corporation your time in return for a salary not making you a relevant stakeholder in corporate decisions? The owners are affected by corporate decisions, but so are the employees. Why don't they have a say in corporate governance?
I think the German model is incredibly sensible here. It's a hard sell in the US, however.
Unions in North America would also have to change to the German model for this to work. An even harder sell I would think.
Quote from: crazy canuck on August 01, 2013, 01:31:25 PMUnions in North America would also have to change to the German model for this to work. An even harder sell I would think.
Yeah, for sure; it would require something of a cultural shift.
Quote from: DGuller on August 01, 2013, 12:21:16 PM
After all, the workers could spend that extra $5 an hour of "car money" on something else entirely.
Of course. But someone sells them "something else entirely" and maybe that person is interested in buying one of Ford's cars now...
Quote from: The Minsky Moment on August 01, 2013, 01:06:00 PM
Quote from: DGuller on August 01, 2013, 12:15:06 PM
Quote from: Zanza on August 01, 2013, 12:12:46 PM
The owners are just one of multiple stakeholders of a corporation. Why is their self-interest identical with the self-interest of the corporation?
I'm not sure I understand the question. Shareholders are the owners.
Shareholders are the owners, but the corporation only exists in the first place because of a grant of public authority.
Zanza has a point in questioning what it means to say an artificial legal construct has an "interest". To the extent one can meaningfully talk about such a thing at all, it isn't obvious that such interest merely coincides with the right to control.
That point may be valid, but the extra responsibilities on top of profit maximization still have to be spelled out, and not just vaguely alluded to. In a competitive environment, implicit gentlemen's agreements don't have a long lifespan.
Quote from: Zanza on August 01, 2013, 01:33:49 PM
Quote from: DGuller on August 01, 2013, 12:21:16 PM
After all, the workers could spend that extra $5 an hour of "car money" on something else entirely.
Of course. But someone sells them "something else entirely" and maybe that person is interested in buying one of Ford's cars now...
Seems like an overly hypothetical thinking for a solid business plan. Keynesian stimulus doesn't work very well when there is leakage. The leakage may be relatively contained on a national level, but on the level of car factory, it definitely isn't.
Quote from: crazy canuck on August 01, 2013, 01:31:25 PM
Unions in North America would also have to change to the German model for this to work. An even harder sell I would think.
The system can work without unions. The employee representatives are elected in free, secret and equal elections by all employees. Usually the union representatives get a big share due to their good organisation, but some other candidates are elected regularly as well.
Quote from: DGuller on August 01, 2013, 01:38:57 PM
Seems like an overly hypothetical thinking for a solid business plan. Keynesian stimulus doesn't work very well when there is leakage. The leakage may be relatively contained on a national level, but on the level of car factory, it definitely isn't.
Fair enough. I agree that the often heard anecdote that he wanted his workers to be able to buy his cars is at least dubious.
Quote from: Jacob on August 01, 2013, 01:33:34 PM
Quote from: crazy canuck on August 01, 2013, 01:31:25 PMUnions in North America would also have to change to the German model for this to work. An even harder sell I would think.
Yeah, for sure; it would require something of a cultural shift.
Well, that's what this thread is about, right?
Quote from: DGuller on August 01, 2013, 01:30:33 PM
Quote from: fhdz on August 01, 2013, 01:01:51 PM
He isn't going to get it, dude. If you can't fit it on a spreadsheet Guller can't wrap his brain around it.
It's that time of the month again, eh? :console:
Yep, it's that time of the month where dealing with Asberger-y robo-drones just isn't going to cut it for me. Sorry :console:
Quote from: Zanza on August 01, 2013, 01:51:07 PM
Quote from: Jacob on August 01, 2013, 01:33:34 PM
Quote from: crazy canuck on August 01, 2013, 01:31:25 PMUnions in North America would also have to change to the German model for this to work. An even harder sell I would think.
Yeah, for sure; it would require something of a cultural shift.
Well, that's what this thread is about, right?
:hug:
And actually the German union model is *preferable* in a lot of ways to the American model. There's a lot less corruption in the German model, for starters.
Zanza: labor can join or walk away at will. Your system gives them a voice in the disposition of someone else's property without a reciprocating surrender of control over their own labor.
Quote from: fhdz on August 01, 2013, 02:00:33 PM
Quote from: DGuller on August 01, 2013, 01:30:33 PM
Quote from: fhdz on August 01, 2013, 01:01:51 PM
He isn't going to get it, dude. If you can't fit it on a spreadsheet Guller can't wrap his brain around it.
It's that time of the month again, eh? :console:
Yep, it's that time of the month where dealing with Asberger-y robo-drones just isn't going to cut it for me. Sorry :console:
:hmm: You don't have to deal with me if you don't want to. But part of not dealing with me is not taking histrionic potshots at me from the sidelines. That's also just good adult manners on top of it.
Quote from: DGuller on August 01, 2013, 02:08:42 PM
Quote from: fhdz on August 01, 2013, 02:00:33 PM
Quote from: DGuller on August 01, 2013, 01:30:33 PM
Quote from: fhdz on August 01, 2013, 01:01:51 PM
He isn't going to get it, dude. If you can't fit it on a spreadsheet Guller can't wrap his brain around it.
It's that time of the month again, eh? :console:
Yep, it's that time of the month where dealing with Asberger-y robo-drones just isn't going to cut it for me. Sorry :console:
:hmm: You don't have to deal with me if you don't want to. But part of not dealing with me is not taking histrionic potshots at me from the sidelines. That's also just good adult manners on top of it.
I may be a lot of things, but histrionic isn't one of them. :D
And you want to talk about "manners"? On
Languish? Where you yourself also take potshots on a regular basis? Give me a fucking break, dude. :lol:
If you make a comment which shows that you lack an understanding of basic marketing principles or anything beyond a corporation's bottom line being beneficial for the corporation, you are going to get called on it. Simple. :sleep:
Quote from: Admiral Yi on August 01, 2013, 02:03:54 PM
Zanza: labor can join or walk away at will. Your system gives them a voice in the disposition of someone else's property without a reciprocating surrender of control over their own labor.
You presume that employees, in general, can find a replacement job as quickly as an employer could find a replacement employee. Given the job market, it's much more likely for an employee to put up with employers' crap (unpaid overtime, no pay raises, cutback of benefits ...) than for an employer to put up with an employee's crap. This is not an balanced relationship.
God fearing fhdz was nicer :yes:
:P
Quote from: Syt on August 01, 2013, 02:11:16 PM
You presume that employees, in general, can find a replacement job as quickly as an employer could find a replacement employee. Given the job market, it's much more likely for an employee to put up with employers' crap (unpaid overtime, no pay raises, cutback of benefits ...) than for an employer to put up with an employee's crap. This is not an balanced relationship.
I do not presume that. I presume that an employee is free to dispose of his time and labor as he sees fit.
Quote from: HVC on August 01, 2013, 02:12:40 PM
God fearing fhdz was nicer :yes:
:P
:P
I'm getting increasingly sick of dealing with people who think economics is a science rather than an art.
DOES NOT COMPUTE IN EXCEL MUST BE SOMETHING WRONG WITH ARGUMENT BEEP BEEP BOOP
A discipline with predictive power is a science; a discipline that creates narratives is a humanity. Economics has predictive power, ergo it is a science.
Of course many disciplines combine the two. I'm thinking of political science in particular.
Quote from: fhdz on August 01, 2013, 02:10:29 PM
I may be a lot of things, but histrionic isn't one of them. :D
Evidently, self-aware isn't one of them either.
QuoteAnd you want to talk about "manners"? On Languish? Where you yourself also take potshots on a regular basis? Give me a fucking break, dude. :lol:
I don't suffer fools gladly, but I don't piggyback off other people actually trying to have a discussing in order to take a potshot from the sideline. That's the bitchy part I called you out on.
QuoteIf you make a comment which shows that you lack an understanding of basic marketing principles or anything beyond a corporation's bottom line being beneficial for the corporation, you are going to get called on it. Simple. :sleep:
Nah, you just insulted me for no reason, again and again. I don't know what the fuck is wrong with you, but I'm not it, so don't take it out on me.
Quote from: Admiral Yi on August 01, 2013, 02:17:39 PM
A discipline with predictive power is a science; a discipline that creates narratives is a humanity. Economics has predictive power, ergo it is a science.
I am not shocked that you feel this way :)
Quote from: DGuller on August 01, 2013, 02:20:23 PM
I don't suffer fools gladly, but I don't piggyback off other people actually trying to have a discussing in order to take a potshot from the sideline. That's the bitchy part I called you out on.
1) It's my thread.
2) You posted a comment in response to my comment, which was merely an articulation of Ford's
own position and philosophy.
3) Your comment indicated that Ford's philosophy "didn't work", when in fact it most clearly did. You based your comment on an incomplete assessment of economic value.
4) This is Languish. Get over it or get somewhere more comfortable.
Quote from: Admiral Yi on August 01, 2013, 02:03:54 PM
Zanza: labor can join or walk away at will. Your system gives them a voice in the disposition of someone else's property without a reciprocating surrender of control over their own labor.
Yes, in principle. That's a choice society can make. Corporations as a legal construct are what society through its political process makes of them.
One thing that might be wrong about American business culture and the economy (see thread title) is that employees as stakeholders in corporations do not get enough representation in corporate governance. I do not advocate that you adopt our system. I merely don't think that corporations have an evident self-interest as DGuller stated and that there are more relevant stakeholders to a corporation than just the shareholders.
Quote from: Admiral Yi on August 01, 2013, 02:17:39 PM
A discipline with predictive power is a science; a discipline that creates narratives is a humanity. Economics has predictive power, ergo it is a science.
Of course many disciplines combine the two. I'm thinking of political science in particular.
It is the fledgling attempts at a science, roughly equivalent to pre-Newtonian Physics, but it doesn't have close to the predictive power of the hard sciences. Physics, Chemistry, Biology, even Geology all have a lot more decimal places than the "order of magnitude" predictive power of Economics. I'd call it closer to Political Science than any of the above.
Quote from: Admiral Yi on August 01, 2013, 02:14:22 PM
I do not presume that. I presume that an employee is free to dispose of his time and labor as he sees fit.
In theory, yes. He can become a vagrant without job, too.
Still, employers have more leverage over employees than vice versa.
Quote from: Zanza on August 01, 2013, 02:25:44 PM
I merely don't think that corporations have an evident self-interest as DGuller stated and that there are more relevant stakeholders to a corporation than just the shareholders.
Well sure. And capital is a stakeholder in employee decisions, and capital and labor are both stakeholders in customer decisions. Everybody is a stakeholder in everything.
Quote from: fhdz on August 01, 2013, 02:25:07 PM
Your comment indicated that Ford's philosophy "didn't work", when in fact it most clearly did. You based your comment on an incomplete assessment of economic value.
That would've been a really interesting point to expound upon. :hmm: Beyond the "Lol, you idiot, you so, so dumb. :XD:", that is.
Quote from: frunk on August 01, 2013, 02:27:56 PM
Quote from: Admiral Yi on August 01, 2013, 02:17:39 PM
A discipline with predictive power is a science; a discipline that creates narratives is a humanity. Economics has predictive power, ergo it is a science.
Of course many disciplines combine the two. I'm thinking of political science in particular.
It is the fledgling attempts at a science, roughly equivalent to pre-Newtonian Physics, but it doesn't have close to the predictive power of the hard sciences. Physics, Chemistry, Biology, even Geology all have a lot more decimal places than the "order of magnitude" predictive power of Economics. I'd call it closer to Political Science than any of the above.
:yes: Especially macroeconomics.
Quote from: frunk on August 01, 2013, 02:27:56 PM
It is the fledgling attempts at a science, roughly equivalent to pre-Newtonian Physics, but it doesn't have close to the predictive power of the hard sciences. Physics, Chemistry, Biology, even Geology all have a lot more decimal places than the "order of magnitude" predictive power of Economics. I'd call it closer to Political Science than any of the above.
Totally agree that it doesn't have the precision of the hard sciences, but i argue that that is a function of the field being studied (human behavior) rather than a limitation of the discipline. Humans have wills and idiosincracies (sp?) and irrationalities that will never be captured 100% by cause and effect models.
Quote from: Admiral Yi on August 01, 2013, 02:32:09 PM
Quote from: Zanza on August 01, 2013, 02:25:44 PM
I merely don't think that corporations have an evident self-interest as DGuller stated and that there are more relevant stakeholders to a corporation than just the shareholders.
Well sure. And capital is a stakeholder in employee decisions, and capital and labor are both stakeholders in customer decisions. Everybody is a stakeholder in everything.
Yes. Now we just need to define how we want each group of stakeholders to participate in corporate governance. I don't see it as evident that shareholders should be the only stakeholders participating in that.
Quote from: Admiral Yi on August 01, 2013, 02:40:03 PM
Quote from: frunk on August 01, 2013, 02:27:56 PM
It is the fledgling attempts at a science, roughly equivalent to pre-Newtonian Physics, but it doesn't have close to the predictive power of the hard sciences. Physics, Chemistry, Biology, even Geology all have a lot more decimal places than the "order of magnitude" predictive power of Economics. I'd call it closer to Political Science than any of the above.
Totally agree that it doesn't have the precision of the hard sciences, but i argue that that is a function of the field being studied (human behavior) rather than a limitation of the discipline. Humans have wills and idiosincracies (sp?) and irrationalities that will never be captured 100% by cause and effect models.
It's also a function of the fact that politics are intertwined with this science. Astronomy was pretty hard to get right as well when it had a political side to it.
Quote from: Admiral Yi on August 01, 2013, 02:40:03 PM
Totally agree that it doesn't have the precision of the hard sciences, but i argue that that is a function of the field being studied (human behavior) rather than a limitation of the discipline. Humans have wills and idiosincracies (sp?) and irrationalities that will never be captured 100% by cause and effect models.
That explains its inaccuracies, it doesn't explain why we should put much trust in it.
Quote from: Zanza on August 01, 2013, 02:43:34 PM
Quote from: Admiral Yi on August 01, 2013, 02:32:09 PM
Quote from: Zanza on August 01, 2013, 02:25:44 PM
I merely don't think that corporations have an evident self-interest as DGuller stated and that there are more relevant stakeholders to a corporation than just the shareholders.
Well sure. And capital is a stakeholder in employee decisions, and capital and labor are both stakeholders in customer decisions. Everybody is a stakeholder in everything.
Yes. Now we just need to define how we want each group of stakeholders to participate in corporate governance. I don't see it as evident that shareholders should be the only stakeholders participating in that.
Help me pin down your position here. Would your argument still hold if instead of a corporation, you had a really large partnership with no limited liability? Are employees the steakholders with a vote because they're citizens of a country that grants a limited liability status to the corporation, or is it simply because they're employed by said company?
Quote from: Admiral Yi on August 01, 2013, 02:03:54 PM
Zanza: labor can join or walk away at will.
Well capital can also join or walk away at will if they do not like the setup.
Quote from: Zanza on August 01, 2013, 02:43:34 PM
Yes. Now we just need to define how we want each group of stakeholders to participate in corporate governance. I don't see it as evident that shareholders should be the only stakeholders participating in that.
If you agree that everyone has a stake in everyone else, and that stakholderdom is what entitles a say in decisions, why is it only corporate decisions that you treat this way? Why don't stakeholders get a voice in the decisions of employees and customers as well?
Quote from: Valmy on August 01, 2013, 02:49:27 PM
Well capital can also join or walk away at will if they do not like the setup.
Sure. And who gets to decide if it joins or walks away.
Quote from: DGuller on August 01, 2013, 02:43:57 PM
Quote from: Admiral Yi on August 01, 2013, 02:40:03 PM
Quote from: frunk on August 01, 2013, 02:27:56 PM
It is the fledgling attempts at a science, roughly equivalent to pre-Newtonian Physics, but it doesn't have close to the predictive power of the hard sciences. Physics, Chemistry, Biology, even Geology all have a lot more decimal places than the "order of magnitude" predictive power of Economics. I'd call it closer to Political Science than any of the above.
Totally agree that it doesn't have the precision of the hard sciences, but i argue that that is a function of the field being studied (human behavior) rather than a limitation of the discipline. Humans have wills and idiosincracies (sp?) and irrationalities that will never be captured 100% by cause and effect models.
It's also a function of the fact that politics are intertwined with this science. Astronomy was pretty hard to get right as well when it had a political side to it.
Astronomy doesn't really have the same kind of impact on the lives of human beings as economics does. It also contains no choice, whereas in economics one can choose what is important and make one's decisions accordingly.
Quote from: Admiral Yi on August 01, 2013, 02:40:03 PM
Totally agree that it doesn't have the precision of the hard sciences, but i argue that that is a function of the field being studied (human behavior) rather than a limitation of the discipline. Humans have wills and idiosincracies (sp?) and irrationalities that will never be captured 100% by cause and effect models.
That's also precisely why there's a lot more narrative being constructed in economics than true scientific prediction. There's certainly a lot more narrative vs. prediction than a lot of economists and risk professionals would like to admit.
holy feisty fahds... I wonder if something's changed in his life recently? :hmm:
Yeah, I'd argue that modern economics, as it's being utilized, is as much a humanity as a science by Yi's definition (which I quite like, by the way).
Quote from: Admiral Yi on August 01, 2013, 02:54:59 PM
Sure. And who gets to decide if it joins or walks away.
Well the shareholders. Capital has a way of fleeing a country pretty quickly if they no not like the business environment. Labor is generally less free to do that if the labor market is particularly bad.
Quote from: fhdz on August 01, 2013, 03:11:02 PM
Astronomy doesn't really have the same kind of impact on the lives of human beings as economics does. It also contains no choice, whereas in economics one can choose what is important and make one's decisions accordingly.
I was not equating the two, I brought up astronomy as an extreme example. Astronomy, limited to solar system anyway, is pretty damn hard of a science, and still it was distorted by politics when politics had a stake in what it concluded. Economics is inherently less hard of a science even with the best of intentions and the least of bias.
Quote from: DGuller on August 01, 2013, 02:47:14 PM
Help me pin down your position here. Would your argument still hold if instead of a corporation, you had a really large partnership with no limited liability? Are employees the steakholders with a vote because they're citizens of a country that grants a limited liability status to the corporation, or is it simply because they're employed by said company?
I don't really have a position on American corporate governance. It's just food for thought for this thread.
I don't really understand the peculiarities of the law, but as far as I know a partnership of natural persons is not a legal entity of itself, whereas a corporation is a legal entity in its own right. Assigning a partnership and a corporation different obligations with regard to stakeholder participation in their governance thus seems at least reasonable. Not sure where exactly I would draw the line as partnerships obviously can also employ people and I guess in a big enough partnership these employees might need some kind of representation as well.
In our globalized world, I would not make the question of whether employees should be represented in corporate governance dependent on citizenship. One of the employee representatives in my company is from Brazil, although all the rest are from Germany, which is not a proportional representation of our employees worldwide. As far as I know our own legislation on co-determination is only applicable to German parts of corporations, i.e. a foreigner working for a foreign legal entity that is owned by a German corporation is not considered in the law. There is very little interest among German politicians, managers and union bosses to change that any time soon, although it certainly is unfair for the foreign employees. I have a lot of contact to my colleagues in our foreign daughters and their employment conditions are nowhere near as good as those of the German employees.
For what it's worth, I think treating employees as stakeholders is just good business. There are intangible, but real monetary benefits towards having a workforce that's happy, secure, empowered, and planning to stick around for the long term. However, I'm having trouble seeing why it has to be legally mandated, rather than just be a talent management decision of the agents of shareholders.
Quote from: Admiral Yi on August 01, 2013, 02:53:45 PM
Quote from: Zanza on August 01, 2013, 02:43:34 PM
Yes. Now we just need to define how we want each group of stakeholders to participate in corporate governance. I don't see it as evident that shareholders should be the only stakeholders participating in that.
If you agree that everyone has a stake in everyone else, and that stakholderdom is what entitles a say in decisions,
I don't say that having a stake entitles you to a say in decisions.
Quotewhy is it only corporate decisions that you treat this way?
As I said, I don't want to advocate a certain model. However, my first post in this thread was as a response to a claim about corporations so that's where I got the context from.
QuoteWhy don't stakeholders get a voice in the decisions of employees and customers as well?
In general, while a lot of parties might have stakes in a give decision (a bit like a butterfly effect), there are obviously degrees of involvement. In my economics classes, stakeholders in companies were differentiated into internal and external or primary and secondary stakeholders (or whatever they were called) and I am sure you can find all kinds of categorizations that make sense for a certain context and base the degree of involvement in a decision making process on those categorizations. Not all stakeholders are equal.
Quote from: DGuller on August 01, 2013, 03:41:12 PM
For what it's worth, I think treating employees as stakeholders is just good business. There are intangible, but real monetary benefits towards having a workforce that's happy, secure, empowered, and planning to stick around for the long term.
Agreed, just as it is in the enlightened self-interest of employees to work for companies that are profitable and financially secure.
Quote from: DGuller on August 01, 2013, 03:41:12 PM
For what it's worth, I think treating employees as stakeholders is just good business. There are intangible, but real monetary benefits towards having a workforce that's happy, secure, empowered, and planning to stick around for the long term. However, I'm having trouble seeing why it has to be legally mandated, rather than just be a talent management decision of the agents of shareholders.
The biggest benefit of co-determination is certainly for average and below-average workers that are easily replaceable. A lot of jobs in a corporation aren't in focus of talent management as you don't need talents to flip burgers, operate forklifts, answer calls in a call center, assemble a product on the assembly line or doing basic administrative tasks. Those employees by themselves have very little power and there is no rational reason for a company to keep them happy, secure, empowered to planning to stick around for the long term. If they don't perform anymore, just replace them. Co-determination is not (as) necessary for the elite employees as those will usually have an easier time to actually walk away from the job and get another and thus companies do indeed have a rational interest in keeping those employees happy, secure, and empowered so that they do stick around for the long term. But that's maybe 10-20% of the workforce in a big corporation. "A big corporation is an ocean of mediocrity with small islands of brilliance" ;)
Quote from: Zanza on August 01, 2013, 03:59:13 PM
Quote from: DGuller on August 01, 2013, 03:41:12 PM
For what it's worth, I think treating employees as stakeholders is just good business. There are intangible, but real monetary benefits towards having a workforce that's happy, secure, empowered, and planning to stick around for the long term. However, I'm having trouble seeing why it has to be legally mandated, rather than just be a talent management decision of the agents of shareholders.
The biggest benefit of co-determination is certainly for average and below-average workers that are easily replaceable. A lot of jobs in a corporation aren't in focus of talent management as you don't need talents to flip burgers, operate forklifts, answer calls in a call center, assemble a product on the assembly line or doing basic administrative tasks. Those employees by themselves have very little power and there is no rational reason for a company to keep them happy, secure, empowered to planning to stick around for the long term. If they don't perform anymore, just replace them. Co-determination is not (as) necessary for the elite employees as those will usually have an easier time to actually walk away from the job and get another and thus companies do indeed have a rational interest in keeping those employees happy, secure, and empowered so that they do stick around for the long term. But that's maybe 10-20% of the workforce in a big corporation. "A big corporation is an ocean of mediocrity with small islands of brilliance" ;)
That's a reasonable point. :hmm:
From what I can tell, the employee representatives in my corporation are usually veterans with decades of history in the corporation. They have a love-hate relationship with the company, it's their lifelong employer, but in the end, they want the company to succeed and make sure the employees participate in that success. They are critical, but usually constructive and do not just try to get the maximum short-term benefit out of the company as they have very little means to get a personal benefit out of any of the decisions they can influence.
What sort of decisions do employee representatives typically influence?
Quote from: DGuller on August 01, 2013, 01:34:31 PM
That point may be valid, but the extra responsibilities on top of profit maximization still have to be spelled out, and not just vaguely alluded to. In a competitive environment, implicit gentlemen's agreements don't have a long lifespan.
There is no general obligation of profit maximization - this has come up recently in case law in Delaware.
Directors of corporations can consider a broad range of objectives.
Quote from: Jacob on August 01, 2013, 04:24:25 PM
What sort of decisions do employee representatives typically influence?
Normal worker councils (usually per plant)Social issues (work time, work rules, vacation, performance control measures, safety regulations, general regulations on renumeration, social institutions like corporate kindergartens or sport facilities): The workers council may actively suggest policies.
Personnel decisions (hiring, job assignments, assigning employees into pay grades, restructuring the organisation etc.): The workers council can react to management decisions and can under certain circumstances reject them.
Management decisions to fire someone are a bit different in that the worker's council can only dissent the decision which gives the fired worker more protection until a court has clarified the case.
Business decisions (everything else): The workers council is informed regularly and detailed, but has no right to participate in decisions. In certain decisions management is obliged hear the suggestions and concerns of the workers council and take them into consideration.
Employee representatives in supervisory boardsAll the same rights as the shareholder representatives. The most important task is to supervise, hire and fire the board of executive directors such as the CEO, CFO etc., confirm strategic decisions for the corporation (such as mergers, huge investments etc.) and audit the annual reports.
The supervisory board of big corporations (>2000 employees, smaller companies have more ownership representation) will always have the same amounts of shareholder and employee representatives, but one of the employee representatives actually represents the upper management employees and the president of the supervisory board has a tie-breaker vote and is always from the shareholder side.
I have some exposure to the German system. Big German companies have a dual board structure. The management board runs the business day-to-day and consists entire of shareholder representatives. The supervisory board *Aufsichtsrat* oversees the management board. It doesn't make management decision. That board is divided 50/50 between shareholder and worker reps but as Zanza says the chair is always a shareholder rep and has the tiebreaking vote. So the employee reps can never prevail unless the shareholder reps disagree. The real value for labor in the system is the right to consultation and information about the companies operations and strategic plans. The value for the company is to bring labor "inside" so they have more of a stake in the long-term success of the company.
It is important to realize this all occurs in the context of a bargaining system in which it is common for wages and employment terms to be negotiated between labor organized in work councils or federations on the one hand and associated groups of employers on the other in a quasi-corporatist fashion.
Quote from: DGuller on August 01, 2013, 12:04:05 PM
Quote from: fhdz on August 01, 2013, 11:57:10 AM
I think you're misinterpreting his goals, or the way he defined success.
Whatever his goals were, or however he defined success, giving people money so that they could (maybe) buy your products is not a transferable lesson. I don't argue that money in common people's pockets may be more beneficial to society and economy than money in corporate vaults, but it would not be more beneficial to the corporation owning that vault.
You can't structure society by expecting entities to act against their self-interest; you instead have to align the incentives for the entities and the entire society. The fact that some entities did choose to act against their self-interest in the past, out of ignorance or out of lack of competition, does not change that pretty basic conclusion in economics.
I got no idea what fahdiz' beef is with this analysis.
I think it's possibly because he still believes there's some sort of free market solution to our troubles, as defined as gross inequality and wage stagnation, which there obviously isn't. Even Yi would probably concede that. But fahdiz is (perhaps) trapped between the rock of wanting to believe in America and the hard place of America sucks.
Quote from: DGuller on August 01, 2013, 03:41:12 PM
For what it's worth, I think treating employees as stakeholders is just good business. There are intangible, but real monetary benefits towards having a workforce that's happy, secure, empowered, and planning to stick around for the long term. However, I'm having trouble seeing why it has to be legally mandated, rather than just be a talent management decision of the agents of shareholders.
I got beef with this one though: it's because of the reserve army of labor, even "talented" labor. The biological and social necessities of that army outweigh the benefits of a happy workforce. And once you're dealing with unskilled labor, people are totally fungible.
Quote from: The Minsky Moment on August 01, 2013, 04:58:35 PMSo the employee reps can never prevail unless the shareholder reps disagree.
Sometimes the corporate charter or bylaws define a higher than simple majority to confirm certain decisions, e.g. Volkswagen may only move a production plant when 2/3 of the supervisory board agree.
Quote from: Ideologue on August 01, 2013, 04:58:53 PMI got no idea what fahdiz' beef is with this analysis.
I think it's possibly because he still believes there's some sort of free market solution to our troubles, as defined as gross inequality and wage stagnation, which there obviously isn't. Even Yi would probably concede that. But fahdiz is (perhaps) trapped between the rock of wanting to believe in America and the hard place of America sucks.
I think fahdiz and to an extent popular culture has misunderstood Ford's position on the Model T. His goal wasn't really "make a car that my employees can buy, because somehow my actual employees buying a bunch of my cars is a winning business model." I think it's more fairly summed up as, "My employees are at a wage level consistent with the average in America, so if I can produce a car that they can actually afford then the market for my cars will be a substantial portion of the American working population whereas my competitors market is the niche set of Americans who have substantial net worth and income."
And there is obviously a solution for our problems. I proposed in another thread that you make servants wages a 100% tax deduction. In ages past guys like Gates would employ a huge staff of servants (I'd wager he has less than 10 full time "staff", and may even have none.) Guys like Romney or even lower wealth people would have a half dozen employees in their household. With modern technology it's not that required, but if it was 100% tax deductible I think a lot more wealthy people would have full time groundskeepers, personal chefs etc.
Quote from: OttoVonBismarck on August 02, 2013, 08:22:09 AM
"My employees are at a wage level consistent with the average in America, so if I can produce a car that they can actually afford then the market for my cars will be a substantial portion of the American working population whereas my competitors market is the niche set of Americans who have substantial net worth and income."
That's exactly my understanding of his business model.
Quote from: OttoVonBismarck on August 02, 2013, 08:22:09 AM
And there is obviously a solution for our problems. I proposed in another thread that you make servants wages a 100% tax deduction. In ages past guys like Gates would employ a huge staff of servants (I'd wager he has less than 10 full time "staff", and may even have none.) Guys like Romney or even lower wealth people would have a half dozen employees in their household. With modern technology it's not that required, but if it was 100% tax deductible I think a lot more wealthy people would have full time groundskeepers, personal chefs etc.
Victorian England is the answer. How progressive.
Well probably better than just creating completely unnecessary jobs - apart from making sure people can afford to live.
Quote from: The Minsky Moment on August 01, 2013, 04:58:35 PMThat board is divided 50/50 between shareholder and worker reps but as Zanza says the chair is always a shareholder rep and has the tiebreaking vote. So the employee reps can never prevail unless the shareholder reps disagree. The real value for labor in the system is the right to consultation and information about the companies operations and strategic plans. The value for the company is to bring labor "inside" so they have more of a stake in the long-term success of the company.
I imagine just being in the conversation brings enormous benefit.
I think the German model's got a lot to recommend it. But it is one of those things where I think culture matters a lot.
From what I've heard the US union model has a bit more of a problem with corruption. In the UK I think we've always had confrontational industrial relations, in part because of the class system. It would make a system based on cooperation far more difficult.
But I always wonder about how culture and economics interact. Why does Britain have the worst mittelstand in the OECD and why is Germany's so large? Why do France and Italy still have absolutely enormous family businesses? There seems to be something in those sort of things that are somehow culture operating on economics.
The companies in the mittelstand are in the sweet spot in terms of getting much of the benefits of German system with fewer of the downsides. They don't usually have to implement full co-determination. They get the benefit of overall wage restraint pacts that impact the whole labor market but they themselves are likely to be negotiating with a shop level works council. The apprenticeship system also works nicely for them because it scales down well and emphasizes development of industry and company specific skills.
Quote from: fhdz on August 02, 2013, 11:19:43 AM
Quote from: OttoVonBismarck on August 02, 2013, 08:22:09 AM
"My employees are at a wage level consistent with the average in America, so if I can produce a car that they can actually afford then the market for my cars will be a substantial portion of the American working population whereas my competitors market is the niche set of Americans who have substantial net worth and income."
That's exactly my understanding of his business model.
Then what about the Fordian (bless his name) model is it that you wish business would return to?
Quote from: Admiral Yi on August 02, 2013, 02:56:42 PM
Quote from: fhdz on August 02, 2013, 11:19:43 AM
Quote from: OttoVonBismarck on August 02, 2013, 08:22:09 AM
"My employees are at a wage level consistent with the average in America, so if I can produce a car that they can actually afford then the market for my cars will be a substantial portion of the American working population whereas my competitors market is the niche set of Americans who have substantial net worth and income."
That's exactly my understanding of his business model.
Then what about the Fordian (bless his name) model is it that you wish business would return to?
PBUH.
I'd like to see more thought given to the actual consumers of goods and services and less short-term thinking about the bottom line by focusing almost solely on shareholder value. In smaller businesses the customer is king; in larger businesses at least in this day and age the shareholder is king and non-shareholders are treated like fodder or useful idiots. Ford showed that longer-term thinking and strategy could also be profitable.
But Ford was famously indifferent to his customers. He continued to offer the Model T in only one color when customers wanted variety, and he continued to produce only the Model T when customers were looking for something new.
His great insight (apart from the efficiencies of assembly line production) was that a previously niche market product could, if stripped down, have mass-market appeal. And we certainly have no dearth of businesses currently catering to the mass market.
Quote from: fhdz on August 01, 2013, 01:12:20 PM
Quote from: Razgovory on August 01, 2013, 01:11:20 PM
If it doesn't work on a spreadsheet, it probably doesn't work in economics.
That's actually demonstrably false.
By all means, demonstrate.
The most powerful tool in economics is regression analysis, which a spreadsheet can't handle.
(Although some prominent economist once made the quip that the most useful tool in economics is long division.)
The current most powerful tool in economics is Paul Krugman.
Quote from: Admiral Yi on August 02, 2013, 04:01:27 PM
The most powerful tool in economics is regression analysis, which a spreadsheet can't handle.
Not to mention the fact that people, who make economic decisions, are not always (perhaps rarely) rational actors.
Quote(Although some prominent economist once made the quip that the most useful tool in economics is long division.)
:D Funny.
Quote from: MadImmortalMan on August 02, 2013, 04:23:02 PM
The current most powerful tool in economics is Paul Krugman.
:lol:
Quote from: Admiral Yi on August 02, 2013, 04:01:27 PM
The most powerful tool in economics is regression analysis, which a spreadsheet can't handle.
(Although some prominent economist once made the quip that the most useful tool in economics is long division.)
You can run regressions in Excel, but the functionality is pretty limited compared to packages like Stata.
Some of the empirical econ guys would say natural experiments are more powerful than regressions.
Quote from: MadImmortalMan on August 02, 2013, 04:23:02 PM
The current most powerful tool in economics is Paul Krugman.
:lol:
I thought Fahdiz was going to demonstrate something using a spreadsheet and then prove it wrong using other evidence. :(