Corporations are formed by individual in legal association with one another. They are the OWNERS of the corporations embodiment in terms of the capital assets owned and controlled by this body of people through their elected and appointed management. Thus, the real legal owner of the earnings is the organization which is owned through private property title in the form of shares by individuals in legal association. Most businesses, particularly national and multi-national businesses operate as state statute-granted corporations whose essential job is to maximize profits and deliver the highest return possible to its owners, or otherwise fail in an increasingly competative business universe. The key operative is OWNERS and in the case of Market Basket the Demoulas family owns it. Corporations are an assemblage of both human laborers and non-human capital assets––two independent factors of production. The people factor are labor workers, including the board members, CEOs, management, and workers, who contribute manual, intellectual, creative and entrepreneurial work. Capital assets include land; structures; infrastructure; tools; machines; computer processing; certain intangibles that have the characteristics of property, such as patents and trade or firm names; and the like owned by the individuals who are the registered owners of the corporation. Thus, fundamentally, economic value is created through human and non-human contributions. The role of physical productive capital is to do ever more of the work, which produces wealth and thus income to those who own productive capital assets. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. They strive to minimize marginal cost, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price, or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital asset input has been rapidly changing at an exponential rate of increase for over 235 years. Such tectonic shifts in the technologies of production have and will continue to destroy jobs and devalue the worth of labor. This reality is now impacting the entire American and global economies as the population majorities are limited systemitically to earning an income SOLELY through a JOB. And when there are no jobs, populations become dependent on coerced tax extraction and promisary national debt to redistribute wealth and provide welfare programs for people who are jobless and propertyless. Universally, every person desires to earn enough to raise a family, build a modest savings, own a home, and secure their retirement. But because the majority of people have been blinded not to see any other means than a JOB to realize those desires, working people will continue to be limited by earning income solely through their labor worker wages, and they will be left behind by the continued gravitation of economic bounty toward the top 1 percent wealthy ownership class of the people that the system is rigged to benefit. Working people and the middle class will continue to stagnate, resulting in a stagnated consumer economy. More troubling is that this continued stagnation will further dim the economic hopes of America’s youth, no matter what their education level. The result will have profound long-term consequences for the nation’s economic health and further limit equal earning opportunity and spread income inequality. As the need for labor decreases and the power and leverage of productive capital increases, the gap between labor workers and capital owners will increase, which will result in turmoil and upheaval, if not revolution. This reality is causing more people to question the future of the American corporation––what its purpose is, how it should be run, and whom it should be engineered to benefit. As this article suggests, the argument that maximizing profit and shareholder value is only one way of defining corporate success. Nevertheless it will remain the predominant objective of business in an increasingly competitive global environment. Still, there is much that can be done to improved the relationship between shareholders and all of the other parties that help account for the success of a company. But the first essential step is to BROADEN OWNERSHIP of companies to include ALL employees and to extend ownership opportunities to customers as well. This can be accomplished through the use of creative financial mechanisms that do no require past savings or a denial of consumption in order to purchase ownership shares in growth companies. Such mechanisms would use insured, interest-free, low service cost capital credit loans repayable out of FUTURE earnings of the investment in technological innovation. We also need to eliminate all tax loopholes and subsidies, encourage corporations to pay out all their profits as taxable personal incomes to avoid paying corporate income taxes and to finance their growth by issuing new full dividend payout shares for broad-based citizen ownership, and eliminate the payroll tax on workers and their employers. But also a well-run company needs to be managed in a way that benefits not just the investors who own its stock, but a wide range of stakeholder constituents––employees, customers, suppliers, and creditors as well as the broader community–– who can now become share owners as well. In such a corporate structure the companys employees and customers can gain far greater prosperity and contribute to and sustain a companys success. At the Center for Economic and Social Justice (cesj.org) we advocate Justice-Based Management (JBM) as a leadership philosophy and management system that applies universal principles of economic and social justice within business organizations. The ultimate purpose of JBM is to create and sustain ownership cultures that enhance the dignity and development of every member of the company, and to economically empower each person as an owner and worker. JBM promotes a company’s long-term profitability within the global marketplace by enabling all worker-owners to serve and provide higher value to the customer. JBM connects every worker’s self-interest to the bottom-line and long-term success of the company, without adding pass-through costs to customers. The JBM process builds upon a written articulation of the philosophy and principles of the company’s leader (typically the CEO or chairman of the board) and leadership core group, in terms of universal principles and core values of the company. JBM proceeds in stages to build a consensus upon these fundamental shared values and vision of the company within each work area of the company. These articulated values provide the foundation for enhancing the productiveness of workers in tangent with the significant productiveness of the technological factor and company profitability, and include such structures as employee-monitored economic incentive programs, participation and governance structures, two-way communications and accountability systems, conflict management systems and future planning and renewal programs. One of the main components of JBM is the “empowerment ESOP.” While the Employee Stock Ownership Plan (ESOP) was originally invented as a means for providing working people with access to capital credit to become owners of corporate equity, most ESOPs are set up as just another employee benefit plan or tax gimmick, or as an employee share accumulation plan (“ESAP”). Most ESOPs today are not designed to treat worker-owners as first-class shareholders. The “empowerment ESOP,” on the other hand, is designed to encourage workers to assume the responsibilities and risks, as well as the full rights, rewards and powers, of co-ownership. Furthermore, all academic and government studies to date have concluded that ESOPs alone are not enough to affect individual and corporate performance. Within a JBM system, in combination with a regular gainsharing program tied to bottom-line profits, and structured systems of participatory management, the empowerment ESOP stimulates everyone in the company to think and act like entrepreneurs and owners. Justice-Based Management offers an ethical framework for succeeding in business. JBM balances moral values (treating people with fairness and dignity) with material value (increasing a company’s productiveness and profits while enriching all members of a productive enterprise). JBM’s three basic operating principles are: Build the organization on shared ethical values—starting with respect for the dignity and worth of each person (employee, customer and supplier)—that promote the development and empowerment of every member of the group. Succeed in the marketplace by delivering maximum value (higher quality at lower prices) to the customer. Reward people commensurate with the value they contribute to the company—as individuals and as a team. Justice-Based Management is guided by the concept of social justice, as articulated by the late social philosopher William Ferree, S.M. Social justice involves the structuring of social organizations or institutions (including business corporations) to promote and develop the full potential of every member. JBM also embeds within an ownership culture the three principles of economic justice defined by the late lawyer-binary economist Louis Kelso and philosopher Mortimer Adler: (1) “participative justice,” or the right to the means and opportunity to participate in the economic process as an owner as well as a worker; (2) “distributive justice,” or the right to the full, market-determined stream of income from one’s labor and capital contributions; and (3) “social justice,” or the right and responsibility of each person to work in an organized way with others to correct the “social order” or institution when the principles of participative or distributive justice are being violated or blocked. Within JBM the principles of social and economic justice provide a logical framework for defining “fairness” and structuring the diffusion of power within the corporation. See cesj.org/learn/justice-based-leadership-governance-management/what-is-justice-based-management/
Posted on: Thu, 07 Aug 2014 22:52:53 +0000
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