Future Beacon

A Company for the Workers

      As a believer in free enterprise, I am very aware that socialism and centralized economic planning create disincentives for invention, productive work, investment and job creation; but many people are more impressed with the observation that free enterprise has been characterized by criminality, corruption, crony capitalism, extreme income disparity and the abusive political influence of the ultra rich. Well, its time that free enterprise cleaned up its act.

      Some small mitigation of all this evil might be found in a new kind of company:

      It is possible to create a company that is organized principally for the benefit of its employees. Such a company would necessarily be controlled by its employees as a group. In the example below, the traditional distinction between labor and management is abolished. Every employee is a worker. Here, the vital distinction is between the employees and the members of the board of directors.

      This explanation loosens technical precision where it might confuse the uninitiated, but more formal explanations can be obtained by contacting James Adrian.

      The board of directors is responsible for running the company. All authority and responsibility within the company is either exercised by the board itself or is delegated by the board to employees of the company. The actions of the board are governed by the bylaws of the company and by the laws of the state in which the company was incorporated. Once the initial bylaws are adopted by the board, the bylaws may be change only by following the rules set forth in the original bylaws. Board members may not vote to elect themselves or other board members. It is assumed that the inspirational leaders and the writers of the business plan will be on the initial board of directors.

      In most states, a company may be incorporated to conduct any legal business and need not state its every purpose and business aim in advance. In this example, the company intends to produce food and retail food franchises aimed at facilitating healthy diets.

      In order to ensure that the direction of the company be controlled by the workers, it is advisable to encode certain policies in the bylaws. Here are a few:

* Any change in the bylaws will require the consent of three quarters of the stockholders owning voting stock.

* There shall be exactly two classes of stock - voting common stock and non-voting preferred shares.

      All stockholders have the right to sell their shares; to propose policies; to receive dividends if they are declared by the board; to purchase new shares issued by the company; and they have the right to assets that remain after a liquidation.

      Holders of voting stock have the additional right to nominate and vote for directors.

      Shares of preferred stock have priority over common stock upon liquidation. The company's preferred stock is not convertible to common stock. Terms of the preferred stock are stated in a "Certificate of Designation".

      Preferred stocks are rated by credit rating companies. The rating for preferred stock is generally lower than ratings for bonds since dividends do not have the same guarantee as interest payments. Creditors have priority over preferred stock upon liquidation.

      Like common stock, preferred stock is traded on stock exchanges such as the New York Stock Exchange, provided the company has made a public offering.

* The company may not issue new shares of the company's stock to non-employees without the concent of three quarters of the stockholders owning voting stock.

* If a director is also an employee of the company owning company voting stock or if that director otherwise owns voting stock in the company, that sock shall be paced in a blind trust for the duration of that director's membership on the board and for at least one year upon election to the board whether that director stays on the board for a full year or not.

* Every person employed five days per week by the company for a period of at least six months, whether full time or part time, will be issued voting stock in the company. Voting stock shall be issued by the company only to employees, and only for the work that they do for the company. Contractors will not be compensated with either kind of stock.

Nothing prevents the company from using contracted services extensively.

* Each employee shall be employed under the terms of a contract describing his or her work and compensation. This contract shall be between the company and that employee and shall be signed by all of the members of the board of directors.

* The greatest cash compensation paid per week to any employee of the company shall not exceed twenty times the least cash compensation paid to any employee of the company working 40 hours per week or more.

* The greatest amount of stock issued by the company in a given year to any employee of the company as compensation for work done shall not exceed twenty times the least amount of stock issued to any employee working 40 hours per week or more.

* There shall be at least five and no more than twelve directors.

* The board of directors shall hire a chief executive officer to conduct the day-to-day tasks of managing the business and shall hire a chief financial officer to oversee and report the financial aspects of the business.

      Don't overestimate the difficulty of financing the startup of such a company. A group can do more than any individual and a group will move mountains for a fair plan. Large amount of preferred stock can be made available for investment, but only when the workers agree to do so.

      It should also be noted that this kind of plan is within the rules of free enterprise. It creates incentives to do productive work. It respects the property rights of individuals. It provides an opportunity to earn a return on investment. It also rewards work with ownership and places the work force in control.

      An entirely different scheme having the same motives is available under the New York State Cooperative Corporation Law. See New York State Cooperative Corporations


      Please feel free to write to me directly for more information or to make suggestions or comments. My email address is jim@futurebeacon.com. You can also go to my contact page to get my full contact information. Suggestions, questions, additional information and critiques are very welcome.