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OP/ED

The moral case for profit-sharing (part II)

Posted on June 4, 2019 at 10:35 PM

"To whom much is given, much is expected."

 

by Dr. Larry Fedewa (June 1, 2019)

 

Last week we discussed the antecedents of the current movement toward corporate social responsibility and the Conscious Capitalist movement and also the paradigm on which a moral claim can be made for a re-definition of "workers' rights" with respect to workers' share of the company's profits.

 

The paradigm is the company's products and services offerings. The moral claim is the right of every person (or legal entity) to be compensated in the same proportion as that person's efforts contributed to the profit or loss from the company's total activities. A simplistic example would be a company profit of $1,000 divided equally by 100 people (or entities) who contributed to the sale of the product. Each share would then be $10.00.

 

Obviously no product line or service is the result of equal contributions by all the people who have been involved with the offering. Such an assignment of the many varied values which produce the products amounts to a quantification of each party's input to the profit or loss experienced by the entire enterprise. Not only are many qualities difficult to quantify, such as risk and perseverance, but some, such as loyalty and teamwork, would seem to have no metric at all. Some are unique, such as creativity; others, such as availability and skills, are competitive and subject to supply and demand. The decisions made by some are critical to both survival and success, while others are routine and conventional.

 

Nevertheless, if profit-sharing is to become the basis for a new interpretation of workers' rights, some intelligible and mutually agreeable formulas must be used. Rather than attempt a summary and rationalization of the many different formulas which have been used and conceived by firms during the robust history of profit-sharing, it seems equally necessary to examine the ethical basis which underlies the need to engage in this practice in the first place.

Economists link the creation of wealth since the Industrial Revolution to increases in productivity, the multiplication of output per unit of effort. The most often used unit of effort is the human labor hour. Since the common characteristic of most technological innovations is the reduction of the human labor required to complete a task, productivity is closely connected to technology. In the modern era, technology in turn is more and more closely connected with the sciences.

 

Whereas earlier productivity was usually associated with individual capabilities, such as footspeed, native intelligence, or instinct - as in logging, fishing, plowing and many other trades - technology-based productivity is based on devices which themselves already incorporate such physical or skill-based characteristics.

 

This approach thus introduces a far more complex process to the production of any saleable outcome, including services. There is an entire process of innovation which precedes what we think of as human labor, a process which involves risk, originality, perseverance, promulgation and eventually marketing and sales. It is only after all this that new products are placed into a traditional business setting for design, fabrication, marketing, sales, repair and warranty services.

 

What has happened in our current business practice is that more and more of the rewards for the enormous gains in productivity which have dominated our civilization in the post-WWII era have gone to the inventors and owners of the new technologies, less and less to the average workers. Yet, no one disputes the fact that, without the workers, the actual implementation of these technologies would never have happened. Because there are more of these folks, and because the skills needed to perform in a high-tech world are more available among the masses of workers, their contributions are typically rewarded at roughly the same level as the loggers and farmers of an earlier era.

But why are they not entitled to a greater share of the gains which these increases in productivity have brought to life in the public square? After all, without them, these innovations would still be unknown, condemned to eternal obscurity. By what right do the owners (investors) get to determine that they are entitled to 80% of the firm's assets while the workers - whose role is also critically important to the success or failure of the enterprise - collectively receive 20% or less?

 

These are human beings, not robots, not slaves, not units to be discarded or exploited. The old "survival of the fittest" logic does not belong, is not expected, and is not tolerated in today's capitalism. Each company, each organization, each business is based on a culture akin more to a family or a tribe than to a 20th century factory. After all, we spend more time at work than at home, at play, or in social activities. More of our lives with our fellow workers than with our families.

 

Success in the business world of this new century demands the pride of accomplishment, respect for the dignity of work, and a company culture which strives to promote the human goals of joy and even love of one's fellows. These are the coming, growing companies, the ones which will survive and thrive in the dawning of the new day.

 

In addition, because of the way our economy is organized, American business as a whole is bound to rise or fall on the basis on the working class' ability to participate comfortably in our ever-growing consumer economy. It is thus in everyone's interest to amend our definition of Workers' Rights to include a new condition - the right to calibrate employee compensation to the success or failure of the total enterprise in terms not only of satisfaction or failure, but also of profit or loss. Remember, in the new Capitalism, everyone who receives a wage - whether "leaders" (the new term for "managers") or "team members" is a "worker". The old terms do not fit this new business model.

 

Another unspoken result of this practice is the fulfillment of the American President's plea to "Buy American". If American workers have the means to continue their traditional support of our consumer economy, the value of tariff wars and harm from trade deficits will gradually fade away as we become again self-sufficient. Let the rest of the world look on in envy, and let Karl Marx turn over in his grave as his "workers' paradise" comes to life in the very system he so thoroughly condemned.

 

© 2019 Richfield Press LLC. All rights reserved.


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