Employee Ownership & Other Social/Economic Reforms

On a pro-people economic system based upon government regulated employee owned free enterprise (as opposed to the current economic system based upon greed driven wealthy capitalist owned pseudo-government regulated free enterprise).

Part 1: Principles of employee owned companies to be set up and enforced by the federal government:

1) All companies larger than 50 employees and "sufficiently" past the original founder(s) (see note #6 of part 1) would be employee owned. Each employee would "own" an equal "share" of the company.

New employees too poor to buy a "share" of the company would be lent the money by the company.  This loan would be repaid by deductions taken out of the new employee's pay checks. Upon leaving a company employees would be paid back their "share" at its current value.

2) Employee compensation would be in pay, profit sharing, and an equal share of the worth of the company. The worth of a company would be its land, equipment, buildings, cash reserves, copyrights, patents, and money owed to it minus the money the company owes.

All employees would share equally in profits, i.e. each employee would receive the same amount. Profits would be distributed between R+D, debt payment, expansion, new equipment, taxes, and employee profit sharing.

3) In order to buy a company from its original founder(s) when that individual(s) wished to sell the company, funds would be borrowed from private and/or government sources by the employees.

The founder(s) would receive a part of profits obtained from patents that the employee owned company obtained from the original company (see #10).

4) Cash for company expansion might be raised by taking out loans. These would be loans similar to student loans (student loans as they were around 1993, that is low interest loans whose payment and interest didn't start until the student was done with school and it was possible to apply for interest free extensions if one didn't have a job). Loans could be obtained from venture capital firms which could advise startups as well.

The current stock market would be converted to such loans.

5) Industries employing large numbers of minors would be exempted all or in part (i.e. this idea is for GM, GE, etc., not fast foods).

6) As a part owner of a company an employee couldn't be fired arbitrarily. They would have to be voted out by their peers or some such democratic method (unless a crime had been committed). See note #2 for part 1.

Suspensions of employees by supervisors would be reviewed within one week by the suspended employee's peers with the suspended employee present.

7) Suggestions from suggestion boxes would result in cash rewards (10% of their worth) for ideas leading to cost cutting measures, etc. Pier review of suggestions would be part of the review process.

This is intended for "rank and file employees". Some sort of reward system for innovations above and beyond the norm by management personnel, whose job sometimes is to make innovations, must yet be worked out.

8) 5-10% royalties would be paid to employee inventors on their patents.

9) A 10/1 (less would be allowed) pay ratio between highest and lowest paid employee (except for sales people - they could be paid more) - including perks but not including patent royalties, suggestion rewards, profit sharing, etc.

10) If a company was purchased from it's founder(s) and there were patents of indeterminate value at the time of sale the founder(s) could require up to 25% of future profits earned by the patents rather than be compensated for the patents at the time of sale.


1- Boards of directors are out since the companies would be employee owned. How would management personnel be chosen? I have some ideas but I believe that with the ground rules given here that suitable democratic mechanisms would be used sooner or later to run companies. Evaluations of bosses by subordinates could be implemented.

2- Firing of employees would be done by some sort of democratic vote cast by other company employees. Usually someone unsuitable for a position would simply go to another position. Theft or total laziness would be the primary reasons to get rid of someone.

My observation is that if there are about 10 or more peers (those doing the same work) it is enough that a 2 out of 3 vote would be accurate enough to fire somebody. For positions in which there aren't enough peers a company committee would review the situation and decide.

If a department of a company filled with lazy/problem people then the rest of the company could vote to fire them or break them up.

3- Pay for piecework has many advantages over an hourly rate (I know of a company where workers make $40k/year under this system). Since capitalist ownership usually takes advantage of workers under this system this method of determining pay has fallen into disfavor. Employee ownership removes the abuses.

4- Probably some sort of probationary period would exist before a new employee was permanently hired and became part owner.

5- Someone said she wouldn't want to share profits with her lazy coworkers. To this I say that over time people would seek out companies/industries in which they were compatible.

Employee ownership isn't for everyone. It's probably more suited to people possessing some combination of average or above average motivation, ability, and/or intelligence, yet not excessively greedy.

If people were treated right and made good money in employee owned corporations this would set a standard for government employees, small businesses, and founder owned companies.

6- A direct transition from original owner(s) to employee ownership may not always be for the best. This is because the rewards to individuals for starting companies should be reasonably preserved. There may be a number of scenarios of transition from original owner(s) to employee owned companies that should be examined with the above in mind. These transitions should be arranged in a way which preserves and rewards the pluses of individual entrepreneurs to society and the economy yet leads to eventual employee ownership if the business continues.

One such scenario is this: a person starts a company with $1 million. He/she hires 100 employees. Two years later he/she wants to sell the company and retire. Lets say the company has about $1 million in assets (buildings, equipment, etc.). The company made $1 million in profits, most of which the owner is keeping for him/herself. Fine and good. Under the employee ownership plan presented in part one the employees, should they wish to, would be able to get a government/private loan to buy the company for $1 million. Yet suppose a third party offers the owner $2 million. Then in this case the owner would be able to sell the company to the third party for $2 million. No restraints would be put on the new owners other than those listed in part two for all U.S. employees. Later, if the new owners want to sell the company and can get substantially more than they paid or the assets are worth then they could sell to the new party for this amount rather than the employees. This procedure would continue as long as new owners could be found to bid substantially more than the actual assets of the company. Eventually free market forces, patent expiration, etc., should bring down the profits of the company so that the employees could buy it.

The above scenario rewards the founder(s) of the company with the worth of the company as determined by the free market.

Should the government match the best offer for the company? No because it would be too hard to discourage dishonest bids in order to soak the government.

Part 2: Constructing the playing field.

The federal government should do its job to construct a level economic playing field. The playing field should be constructed so that it is pro-people rather than pro-money.

The following should be implemented for all employees, regardless of where they work:

1) Elimination of most mandatory overtime, including that for salaried workers. Overtime would be paid to salaried workers past 40 hours. The work hours might be averaged over a month or two for salaried workers.

2) A minimum of 4 weeks vacation for everybody that works (including foreign labor (as in Sweden)).

3) Use of part time or temp agency employees in order to avoid hiring full time employees would be illegal or discouraged. This might be implemented by requiring that temp employees be paid at least $15/hr or no less than the pay and benefits of a company's lowest paid permanent employee, whichever is greater, and that part time employees of a company receive pay equal to that of full time employees doing similar work and benefits that are, at the least, in direct proportion to those of full time employees.

4) An OHSA 800 number for safety hazards. Talk of work place safety teams is promising.

5) Enforce and strengthen anti-trust. Federal anti‑trust regulation has become a joke. Employee ownership would help here since outsiders wouldn't be able to buy shares of a company.

It follows that at employee owned companies a vote would be taken among employees on whether they wanted to be part of another company (since each employee owns an equal share of the company).

There probably are situations where companies need to grow by merging.

6) Make it illegal for local or state governments to use tax break incentives for businesses to locate in their areas (except for enterprise zones).

7) Regarding union labor laws: allow workers to work in job classifications other than their own and allow management to perform blue collar work. The current rules are counterproductive and divisive.

Unions would probably cease to exist at employee owned companies for lack of need.

8) Implement tax reform. Taxes should be fair and as simple as is reasonably possible. Examine Jerry Brown's flat tax in place of the current system. The main parts are: a 13% personal income tax (which Brown thought should include social security but clearly social security should be kept as it is) and a value added tax (13% x (sales - purchases)) on businesses. A progressive tax rate might be kept in lieu of a flat 13% for personal income taxes.

Taxes on businesses help capture income taxes which aren't collected because of unreported personal incomes so there should continue to be some sort of corporate tax or perhaps a national sales tax.

I suspect a sales tax or value added tax on corporations rather than an income tax on their profits would work better.

9) The national unemployment rate should be accurately measured (it currently isn't).

10) Full employment should be achieved by linking the unemployment rate to some combination of lowering the number of hours worked (currently 40) at which overtime time pay kicks in and raising the amount paid for overtime (currently time and a half).

Thus as automation/computers/robotics reduces work performed by humans the benefits are shared by all. The pain of recessions would also be shared more evenly.

Unemployment compensation should be a much smaller problem for employers. Competition from prison labor would be less of a threat to workers.

11) Importation of manufactured goods or raw materials from other countries which don't implement #1,2,3,9 should be ceased. Importation of manufactured goods or raw materials from other countries which don't observe our environmental standards should be ceased.

One might ban trading with undemocratic nations but if #1,2,3,9 were observed the nations involved would probably be democratic.

Outsourcing of call centers should be illegal due to the low wages that they pay. My personal experience with offshore call centers is one of receiving poor service and hearing poor English.

12) It is desirable that American consumers be able to purchase well made or otherwise desirable goods made in foreing countries but not at the expense of American workers (also not to unnecessarily increase the U.S. trade deficit). So that American workers not be pitted against workers in democratic countries meeting #1,2,3,9 and yet having substantially lower costs of living, companies in democratic countries that we trade with should meet, in the least, a realistic minimum wage for the U.S. (say 1968s minimum wage, adjusted for inflation). The American company auto plants in Mexico could be made to join the UAW and pay, say 80%, of UAW wages. Americans should be employed in some sort of foreign service to spot check the wages paid to employees in foreign countries that worked on goods exported to the U.S. If a foreign country or foreign company engaged in trying to be deceptive on what their employees were paid the U.S. should cease trading with the country/company.

13) 10 or 12 hour work days for 4 or 3 days per weeks should be outlawed unless the employees vote for them.

14) The problem of too high or varying (from state to state or nation to nation) benefits should be addressed. Health care reform should take into consideration what companies in other countries have to pay for their employee's health care.

Under employee ownership, work related injuries should diminish greatly.

15) Welfare reform should include linking time on welfare to the unemployment rate.

16) Replace a defined benefit pension system for private companies with the following system. Require private employers to contribute to a federally run pension system for employees. Roughly speaking, with the details still to be worked out, I suggest that employers contribute annually for each employee a percentage, on a sliding scale, of their annual profits. If they don't make a profit for a given year, they don't have to contribute. Retirees would be able to draw from this fund on retirement, irregardless of their employer's contributions. This makes sense since in a free market system some employers make money while others loose money. Government employees would continue to be covered by government pension systems. There is a difficulty here of getting smaller employers to contribute. Any suggestions?

17) Corporations should be incorporated in the states where they have their headquarters.

18) The problem of varying from state to state or nation to nation benefits should be addressed. Health care reform should take into consideration what companies in other countries have to pay for their employee's health care. Under employee ownership work related injuries should diminish greatly.

19) It should be illegal for an employer to force an employee to lie and illegal for an employer to fire an employee for refusing to lie. An example was the TV reporter fired for refusing to lie about growth hormone in milk at a Florida TV station.

Part 3: Change the investment market.

Making money with money is in some cases immoral (such as the current stock market; see part 1, #4). Possibly, some investors wouldn't like to invest in employee owned companies under the changes proposed. Immoral investments should be eliminated as possible:

1) Eliminate tax free government bonds.

2) Make it illegal for any American to invest in a company in a country which doesn't have democracy and human rights.

3) Land speculation as an investment is sad in that it often involves acquiring land and then waiting for overpopulation to raise its value.

4) Foreign businesses shouldn't be allowed to own any homes, real estate, mines, or farmland in the U.S. Foreign countries or businesses shouldn't be allowed to purchase any U.S. businesses.


general notes:

1) Many of the numbers, such as the 10/1 pay ratio between highest and lowest employee aren't hard and fast at this point (in this case the ratio could be lower). 2) The number of advantages to this economic scheme seem to me to be too numerous and obvious to mention. Should they be listed?

One less obvious advantage would be the effect of employee ownership on the press and media. Hopefully journalistic standards would improve under this system.

Also, in employed at will companies employees can be afraid to speak out. This can stifle new ideas and pursuit of improvements.

3) The U.S. government needs to return to growing the money supply as the wealth of the nation increases. The current system of built-in inflation means that the fundamental principle of working and saving for one's retirement has largely been destroyed since inflation reduces the value of savings. People are thus compelled to invest but investment without risks is often predatory or parasitical. Investment with risks (e.g. in an invention of questionable value) is something those who have excess income to dispose of should participate in, not those saving for their golden years.

4) The minimum wage isn't what it was in 1968 in the sense that college education, health care, and car insurance costs have greatly increased since then, relative to inflation. What I remember from 1968 is that inflation was about 2% and my savings and loan paid 3% interest so banking one's savings helped also. Public funding of colleges must be restored. If we had single payer health care we could take car accident injuries off of car insurance and get rid of mandatory car insurance. Two huge insurance costs could be eliminated with one stone.

5) Health care costs are out of control. I believe that before Reagan hospitals were non-profits and HMOs were started under Nixon (and the idea that profit could be made on health care). According to a documentary on PBS in Japan the government has a book of what should be paid for medical expenses. That's all that medical providers can charge. I suggest getting that book and applying it to the US. Few areas of the economy show the evils of unregulated capitalism more than the pharmaceutical industry. I favor starting a non-profit government run drug company to provide drugs alongside the private sector. Current drug companies don't even want to make some necessary drugs because the patents are expired and profits low. For-profit drug companies receive the benefits of research carried out at public universities.

6) The ideas in this paper won't be implemented with the current rich get richer polictial system. Over 200 years of the current system has turned the U.S. into, to a large extant, a plutocracy. Shovelling unlimited money at politicians is called freedom of speech rather than bribery. The Supreme Court gave corporations the same rights as people. What is needed in the Constitution is a seperation of state and money, as with the constitutional seperation of state and religion. We need a good stiff inherintence tax. public funding of political campaings, opening up public radio and TV to many more political debates and candidate town halls, the making of it to be illegal for lobbyists to give money or gifts to politicians, the relevant ideas in this paper, and teaching much more on how to function as a citizen in high school (about 8 classes over 4 years on American political history, economics, media, democracy in other countries, U.S. imperialism, the rise of dictatorships, how to monitor current events, 100 years of Jim Crow, history of unions, Ralph Nader said that everyone should do a FOIA, the teacher could take the day's newspaper and discuss before the class how the day's events would affect people's lives, have the class read some union court cases, ...).

7) A Constitutional amendment should be implemented to ban US imperialism. US military or covert action should not be used against foreign governments to aid US companies abroad.

Comments, etc may be sent to jcapizzo@capizomics.com

Version 10/23/2018