Re: ESOPs, state capitalism, compensation for labor

[Charles Upton <cupton@kent.edu>]

>
>Regarding Charles Upton's mistaken remark: 
>"4.  Remember, the Soviet system was, in theory, 100% ESOP'ed"
>
>It is easy to confuse the rhetoric of a worker state with the
>practice of worker ownership. Socialism is simply another
>word for state capitalism. As Jeffrey Gates would put it, what
>is needed is "up close" capitalism. Where ownership is concentrated
>in the hands of a few, whether they be individual billionaires, or
>trustees of institutions (and the state is just one very large
>institution), the principal-agent problem intensifies. No one
>up close is monitoring the capital on behalf of the owners.
>
>Employee ownership decreases the principal-agent problem because
>the owners are close enough to the capital to hold managers
>accountable. Furthermore, if self-monitoring reduces the
>overall monitoring costs, then the company will be more
>efficient. Even the self-monitoring dental hygienist adds 
>additional value to the bottom line.
>
>Granted, the contribution of the hygienist is of lesser economic
>value than that of the dentist; but both of them impact the
>bottom line. Most ESOPs allocate shares based on W2 earnings.
>Since the skills of the dentist draw a higher W2, the dentist
>will gain a larger share of the pie, perhaps commensurate with
>her larger contribution; however giving the hygienist his fair
>share of the pie has a positive impact as well (again assuming
>ownership education and employee involvement).
>
>Dan Bell
>International Program Coordinator
>Ohio Employee Ownership Center
>Kent State University
>
Mistaken?  I think not.  All I can say is that the WSJ has run articles
showing how firms have used ESOP's to protect entrenched management against
outside monitors. 

The point of the Russian Lesson is that saying something is true in theory
is not the same as saying that it is true in fact.

The point about the dentist/hygenist and the ESOP misses the point.  Most
dentists do not set up an ESOP.  The ownership structure is 100% dentist.
A sensible dentist will use other means to get employee input.  
Charles W. Upton

http://www.personal.kent.edu/~cupton