July 18, 2015


Capitalism for the Rest of Us (JOSEPH R. BLASI, RICHARD B. FREEMAN and DOUGLAS L. KRUSE, JULY 17, 2015, NY Times)

Capital's share of national income has risen, while labor's share has fallen -- even though it includes lavish compensation of executives who are paid disproportionately through stock grants, options and bonuses. To restore prosperity for all, we need to spread the benefits of economic growth to entrepreneurial citizens through profit-sharing and the ownership of capital. This isn't some radical notion; it has a long tradition in America.

Many of the founders believed that the best economic plan for the republic was for citizens to own land, which was then the main form of productive capital. [...]

The United States already has more extensive profit-sharing and employee share ownership than many other advanced economies. In the European Union in 2010, fewer than 10 percent of workers own company stock and fewer than 30 percent have profit-sharing (except Sweden, where the figure is 36 percent).

In the United States last year, close to 20 percent of private-sector employees owned stock, and 7 percent held stock options, in the companies where they worked, while about one-third participated in some kind of cash profit-sharing and one-fourth in gain-sharing (when workers get additional compensation based on improvement on a metric other than profits, like sales or customer satisfaction). An exemplar was Southwest Airlines, which paid $355 million of its more than $1 billion in corporate profits last year to union and nonunion workers and managers, on top of salaries.

Our research found that these programs, when combined with worker participation in solving problems, and increased training and job security, raise productivity and benefit workers. In every year, about half the winners in Fortune's list of 100 Best Companies to Work For have some type of broad-based profit or gain-sharing or stock ownership for regular workers. Google, Intel and Starbucks all have broad-based stock grants or options for their employees. Wegmans has profit-sharing. W. L. Gore, the maker of Gore-Tex, and Publix Super Markets, which operates in the Southeast, are owned by employee stock ownership plans, wherein a workers' trust typically borrows money to buy shares that are paid out of company revenues.

Some scholars have worried that employee-share ownership is too risky when workers buy the stock with their wages or 401(k) retirement savings; Enron is the classic example. We agree. We favor only ownership policies that emphasize grants of stock (as in the case of employee stock-ownership plans), restricted stock (which has to be held on to for a certain period of time, incentivizing workers to stay) or stock options.

Even setting aside the literal focus on building capital universally, such plans depend on maximizing corporate proficts.  This is what's left of the Left at the End of History, putting Hillary to the right of every president but her husband and W.

Posted by at July 18, 2015 9:00 AM

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