Not sure if this is the appropriate forum, so moderators feel free to move.
Given the current climate on WS, I have given a lot of thought as to what a fair and equitable business model would be for the new generation.
Typically, a business is formed by an owner or partners. They build and develop the business until they can attract investors, and which point they
may go public. When this happens, a board of directors takes over control of business operations and it grows and becomes disconnected with the
workers who make the products. This is the dilemma we face right now. Workers are not being paid fairly and they are seeing their jobs go overseas.
So, what to do to create a business model that gives workers a fair share of compensation, keeps the business in America and allows for growth and
Here's the idea, albeit not entirely new, just expanded on an old idea. You have heard of employee own corporations, correct? Well my thought is to
take it to the next level and make it a truly employee owned corporation. How? Simple. Here is a basic model:
A core group starts the business. For arguments sake, let's say they are going to make snack foods, like corn chips. Simple enough, and can be
started very small. So the core group (let's say 5 people) invests $5k to get the business rolling. Now as partners, they divide the profits
equally. Simple enough. now the business starts to grow and they realize they need to hire workers to keep up with the demand. Typically, they
would hire someone for an hourly wage and pay taxes, insurance, workers comp, etc. All the things that bleed a company dry. Now under the new model
it would work differently. Let's say they need to hire a packer. All five partners agree on the new person to be hired. But, instead of an hourly
wage, they are cut in on a percentage of the profits for compensation. Now since they did not contribute to the initial investment, it is not fair to
give them 1/6th of the profit...yet. So, a smaller percentage is given and let's say they can advance their share for each year they are an owner and
spread it over five years. In five years they are an equal partner. This continues with each new "partner" that is brought in. All "partners" are
involved in the hiring process and all business decisions. The core partners retain the top positions in the company, and have final say in business
decisions, but everyone else is more or less the board of directors.
Now, let's say John has been a "partner" for 10 years. He decides he wants to leave. His severance would be the value of his percentage ownership in
the company. So if the profits of the company were, let's say $1M, and there were 100 employees, then his percentage would be 10%. 10% of $1M would
be $100k. Obviously the longer you are there, and the better the profits, the better the severance. Now you would also have to have a certain amount
of profit that is retained for growth and expansion. So this money is taken out before the profit sharing disbursement occurs.
By using this model, the janitor makes the same amount of compensation as the president of the company does. All "partners" are equal when it comes
to pay, as long as they are "vested" in the company, their five years. This also ensures the company stays in the US since all the "partners" are US
citizens. And, since everyone is involved in the hiring process or "partner" selection process, everyone will ensure the right person for the job is
brought in. They would also hold each other accountable, or self police.
A fair and equitable company that ensures equality for everyone. It also will produce superior products because each "partner" will realize their
compensation is tied directly to the performance of the company. Made in The USA would once again mean something.
That's my thoughts anyway. No need for WS, no huge million $$ bonuses for executives. Just a simple owner driven and operated business.
on 10/6/2011 by haarvik because: (no reason given)