Great discussion! Here are two more reasons why owners may be reluctant to cede (some degree of) control:
1. There are often tradeoffs between different motives for business decision-making. An example I'm very familiar with is occupational safety and health. It really is the case that safer workplaces may entail more expenses and reduce profits. There's a massive literature on this. If you share control you run the risk that workers will substitute their motives for yours. Incidentally, one interesting factor I encountered working in this area is that, because workers aren't "owned" by the firm, investments in them, including in their safety, have an accounting cost but generate no corresponding asset. Even if an employer, for humanitarian reasons, wants to make jobs safer, the standard metrics militate against it.
2. There exists what economists would call a taste for control among many people. Owners and higher level managers presumably are overrepresented in this group, since they have chosen career paths that promise to satisfy it. The argument is analogous to the documented observation that wealthy people are, on average, less charitable than those with lower incomes.
How can we use your insights about the 'squish' of sharing power to find a more resonant message? What would it take for the network of nonprofits and advocates who read the Stakehold to find a framing that makes owners sharing control 'braggable' and embarrassing not to do? I'm looking forward to the next episode!
I ❤️ this question--it's very much on my mind with this project. My goal with the next round of posts is to lay out what people are actually doing, then see what labels people are using for what!
As a Board member serving our condominium HOA, I get to see many of the same problems up close. In California, as in ESOP law, there are some essential statewide laws that we cannot ignore, but the CC&Rs for each property can be changed by 67-75% of owners (depending on age of property). We have to be flexible and innovative. With generational changes we are seeing changes in priorities. What I hear from the ESOP participants in Own It! about a careful process of hiring and acculturation, is what we are seeking to adapt for our purposes. That said, renters and probationary hires have different goals.
Yes! Part of our use of the phrase "the ownership economy" is the intuition that we should own--and control--the institutions that affect our lives. An HOA is a great non-employee-ownership example of that. It also makes me wonder how much training in democratic decision-making HOA members have had...
Fair, yes. Most ESOPs don't have employee votes on anything other than sales, so major investment decisions rest with the executives and the board, with input from the trust.
The horizon problem isn't quite so simple. A single owner has one time horizon; multiple owners have many. We've seen this in the employee ownership world when the possibility of a sale arises. Older workers pften want to cash out; younger ones often don't, because they haven't had time to build up much equity. The same split might appear in decisions about long-term investments.
Fair point. I wonder if with one owner, that horizon battle is just internalized--I've certainly heard owners express real internal conflict about whether to sell or keep at it.*
Is it fair to say that ESOPs "solve" this problem by putting that decision into the hands of the ESOP trust? Sort of like most countries put interest rates (another horizon problem!) in the hands of central bankers?
Great discussion! Here are two more reasons why owners may be reluctant to cede (some degree of) control:
1. There are often tradeoffs between different motives for business decision-making. An example I'm very familiar with is occupational safety and health. It really is the case that safer workplaces may entail more expenses and reduce profits. There's a massive literature on this. If you share control you run the risk that workers will substitute their motives for yours. Incidentally, one interesting factor I encountered working in this area is that, because workers aren't "owned" by the firm, investments in them, including in their safety, have an accounting cost but generate no corresponding asset. Even if an employer, for humanitarian reasons, wants to make jobs safer, the standard metrics militate against it.
2. There exists what economists would call a taste for control among many people. Owners and higher level managers presumably are overrepresented in this group, since they have chosen career paths that promise to satisfy it. The argument is analogous to the documented observation that wealthy people are, on average, less charitable than those with lower incomes.
Great write-up as always, Mark!
How can we use your insights about the 'squish' of sharing power to find a more resonant message? What would it take for the network of nonprofits and advocates who read the Stakehold to find a framing that makes owners sharing control 'braggable' and embarrassing not to do? I'm looking forward to the next episode!
I ❤️ this question--it's very much on my mind with this project. My goal with the next round of posts is to lay out what people are actually doing, then see what labels people are using for what!
As a Board member serving our condominium HOA, I get to see many of the same problems up close. In California, as in ESOP law, there are some essential statewide laws that we cannot ignore, but the CC&Rs for each property can be changed by 67-75% of owners (depending on age of property). We have to be flexible and innovative. With generational changes we are seeing changes in priorities. What I hear from the ESOP participants in Own It! about a careful process of hiring and acculturation, is what we are seeking to adapt for our purposes. That said, renters and probationary hires have different goals.
Yes! Part of our use of the phrase "the ownership economy" is the intuition that we should own--and control--the institutions that affect our lives. An HOA is a great non-employee-ownership example of that. It also makes me wonder how much training in democratic decision-making HOA members have had...
Don't get me started! But certainly a “sub"-topic worth exploring.
Get started! And then share a link so that we can include it next week =)
Great piece, Mark! You may have interest in this paper the Predistribution Initiative published with Oxfam American a few years ago making the investment case for sharing more influence with workers and communities: https://www.oxfamamerica.org/explore/research-publications/getting-ahead-of-the-curve-on-dynamic-materiality/
Looking forward to collaborating on this important topic with you and Tom Powdrill!
Heck yeah! Thanks for sharing.
Fair, yes. Most ESOPs don't have employee votes on anything other than sales, so major investment decisions rest with the executives and the board, with input from the trust.
The horizon problem isn't quite so simple. A single owner has one time horizon; multiple owners have many. We've seen this in the employee ownership world when the possibility of a sale arises. Older workers pften want to cash out; younger ones often don't, because they haven't had time to build up much equity. The same split might appear in decisions about long-term investments.
Fair point. I wonder if with one owner, that horizon battle is just internalized--I've certainly heard owners express real internal conflict about whether to sell or keep at it.*
Is it fair to say that ESOPs "solve" this problem by putting that decision into the hands of the ESOP trust? Sort of like most countries put interest rates (another horizon problem!) in the hands of central bankers?