What's Wrong With Corporations?

[Jerram]

I mean intrinsically wrong, because every kind of business operation, whether the biggest multinational entity down to the sole proprietor, can be a bad actor and the protection from individual liability that these entity forms protect can be stripped away.

Without investor liability limited to the investment, which is what corporations, limited liability companies and limited partnerships do, money doesn't move and business above the lemonade stand stops.  And if your retirement fund is invested in index funds, which is probably is, that's not good news.

Did "corporations bad" begin with Weyland/Yutani in Alien?

[Thufir Hawat]

I mean intrinsically wrong, because every kind of business operation, whether the biggest multinational entity down to the sole proprietor, can be a bad actor and the protection from individual liability that these entity forms protect can be stripped away.

IMO,that's exactly the problem. If there's protection from liability, it is human nature to assume there shall be no consequences & that permission has been given to carry out orders. Any orders.
And whatever can go wrong...

Mind you, I'm not saying corporations aren't useful from an economic standpoint. Though your "business above a lemonade stand stops" is a hyperbole like any other.

Did "corporations bad" begin with Weyland/Yutani in Alien?

Probably way earlier than that. I'm betting on "long before movies were a thing".

[Jerram]

IMO,that's exactly the problem. If there's protection from liability, it is human nature to assume there shall be no consequences & that permission has been given to carry out orders. Any orders.
And whatever can go wrong...

Mind you, I'm not saying corporations aren't useful from an economic standpoint. Though your "business above a lemonade stand stops" is a hyperbole like any other.Probably way earlier than that. I'm betting on "long before movies were a thing".

I'm not sure what you mean about no consequences.  Corporations are sued by their shareholders, third parties and other entities all the time for anything from negligence to fraud.  In fact, not being adequately capitalized and insured are prime reasons for stripping protection and making the individual owners liable.

Why would I, as an investor, take an ownership position in a corporation, limited liability company or limited partnership where if the business fails, creditors can come after my personal assets after my investment is exhausted?  No one in their right mind would risk money like that.

It is insane for a small business owner, once he's above the lemonade stand level and has nonbusiness assets to protect like real estate, not to incorporate or form an LLC.  If he carries liability insurance and can meet debt as it falls due, he or she protects those assets from creditors in a lawsuit or bankruptcy.  The individual might have to personally guarantee company debt to a point, but that is how the game works.

[GloomCookie]

So the first corporation that we kinda recognize as such would be the Dutch East India Company (Video on it here: https://youtu.be/zPIhMJGWiM8). Now on to what Jerram is talking about.

Corporations, Limited Liability Companies, Limited Partnerships, they're all there for one purpose: To make the individual person less liable in the event of disaster. They initially began as a way to finance trade missions to foreign lands as before this, if you wanted to sell goods and services in a foreign land you needed first the capital to buy the cargo and then the capital to either hire a ship or buy it outright and stock it with a crew, provisions for the voyage, etc. and then you had to hope the crew made it there, sold your goods at a big enough profit, and sail home. At any point, if that ship doesn't make it, you're out all that money. Given the difficulty in acquiring capital in the first place, you can bet it's not a good idea to put all your eggs in one basket. So that's what the first corporations did, they sold stock in a trade mission that let a single investor break up that large clump of capital into several smaller pieces so that if the mission failed and the ship was lost, you're only out a piece of that total investment, and can use the rest to finance other voyages which, in the grand scheme of things, would eventually net a profit.

Corporations are basically legal entities that exist to protect the individual investors, which is why large corporations have a Board of Directors. These are either the investors themselves or their legal representatives who want to have a say in the operations of the company and can choose to appoint, discipline, and remove a Chief Executive Officer (CEO) based on performance. They're there to manage the investment of the company, and yes they are mainly driven by a profit motive. These are people investing millions, possibly billions of dollars into a company with the expectation that when they choose to pull their investment (or continue making money off the dividends) that they make more than their initial investment and thus turn a profit. That doesn't mean they are one-dimensional, however, as they each have their own goals and agendas and that reflects who they vote in for CEO. If they're not happy with their CEO or how the investments are going, they might withdraw and sell their shares to other members of the Board, which is usually dictated in the terms of the corporation's charter.

Corporations also provide legal protections against lawsuits and other punitive methods to bring a corporation into compliance. When a government agency levies taxes and fines, they usually do so to the corporation itself, not the individuals operating within unless they are directly guilty of a criminal act. If a corporation is found to be dumping toxic chemicals into a stream, the government can mandate that the company pay huge fines and clean up the mess, and those fines can be hefty. Given that the corporation must hand over all accounting information to its investors, the last thing a CEO wants to do is show a huge deficit caused by government fines and lawsuits because of such events. The Board looks at the total profits and can do the mental arithmetic to determine if the CEO is acting in the best interests of the company or not. The company also often keeps a team of lawyers on hand to oversee legal matters, both to proactively protect against future lawsuits and to fight legal battles when and where they occur. As Jerram pointed out, lawsuits are common ranging from crazies wanting to get free money to legitimate cases of harm caused by the company.

Corporations, LLC's, etc. all exist to create a firm divide between the individual investors and the business. If the business gets hit so hard and so fast by deficit that it goes bankrupt, the assets owned by the corporation are at stake, not the personal property of the investors. This buffer keeps the investors from becoming overly invested in their own projects, and thus making sure that they have a fallback plan if the ship sinks. They can lose the business and wash their hands of it and start over.

[Vekseid]

Did "corporations bad" begin with Weyland/Yutani in Alien?

Listen to the lyrics:

https://www.youtube.com/watch?v=RRh0QiXyZSk

You load 16 tons, what do you get?
Another day older and deeper in debt
St. Peter, don't you call me 'cause I can't go
I owe my soul to the company store

I was born one mornin' when the sun didn't shine
I picked up my shovel and I walked to the mine
I loaded 16 tons of number nine coal
And the straw boss said, "Well, a-bless my soul"

He's referring to several things here. Child labor, pollution, company scrip. To defend these practices and fight the rise of unions, the companies involved waged actual war on their own employees, via organizations like the Pinkertons. The Battle of Blair Mountain is particularly infamous, including dropping bombs on civilians.

Of course, companies being evil goes back further, but in the US the longstanding hatred from them stems primarily from the Gilded Age and its consequences, leading to the rise of unions, communist sympathies, trust busting, and more.

[Jerram]

I'd be the last one to deny that company business practices can exploit labor and have done so many times, but it doesn't have to be a corporation.  The Jerram Coal Company could be the culprit in 16 Tons (the song doesn't identify who the owner is, just refers to "the company") but the company might be entirely owned by me, or be a partnership, or a corporation with thousands of shareholders.

Exploitive business practices can be reined in by securities law, anti-trust law, child and other labor laws, clean air acts, clean water acts, safety laws, etc.

A corporation's purpose is to limit the liability of the shareholders to the value of their shares to encourage and protect investment.  Without this protection there is no investment.  You can make this protection a condition of being financially responsible by requiring the company to be adequately capitalized and carry enough liability insurance (which varies.  Jerram Lemonade Stand doesn't need much of either, Jerram Dynamite Company needs a lot of both.)  I'm saying that this form of business is not inherently evil.

But if you said that unregulated capitalism and an unregulated market is a soulless exploiter of humanity and the dignity and value of labor, I'd probably agree for the most part, but ... . 

[Vekseid]

You asked a question.

A corporation's purpose is to limit the liability of the shareholders to the value of their shares to encourage and protect investment.  Without this protection there is no investment.

China has largely proven otherwise. Maybe it will bite them.

Have you dealt with many investors? So fucking many of them are actively, wantonly ignorant. To the point of being offensive. Like some fucked up version of a baseball fan who only sees the stats and not the players or teams. Only this time the livelihoods of innocent people are at stake. This investment shield has enabled an immense degree of toxic behavior, and some degree of direct accountability may help things. Alternately, workers could have some guaranteed minimum say in the business they work for.

I have also met some quants who view themselves as being directly responsible for said livelihoods, and stress the fuck out about their clients. Which is all well and good, but... kind of fucked up that our society functions like this. Someone in New York provides the funds to get some corn into Atlanta - great. Is this really the best way?

I am hugely skeptical of how heavily financialized we currently are.

[GloomCookie]

I haven't seen Shark Tank but I've heard of it and I know one of the things they do is ask a lot of questions. A lot. They want to know important things, because they're about to invest heavily in a new start up and they need to be fully aware of just where that money is going. I used to watch a show with my mom called the Profit, and another (I forget the name) where this guy invests in garages and helps turn struggling businesses around. These are people with the capital to make business happen, and they want to know everything. How does this work, how does that work, what are you doing about this, so on and so forth. They are 100% invested because they need to know they're not throwing their money away.

But when you get to corporations the size of something like Walmart, there are so many moving parts that you can only look at the big picture stuff, and even a major investor is going to have trouble looking deep into the company because there's no way they can visit every single Walmart and see exactly what is going on, especially since two different locations are going to be entirely different.

One thing I'm not a fan of is when companies are bought and sold to break off chunks here or there for some larger corporate entity to absorb the part that's most profitable, knowing that the discarded remains are going to be less profitable overall and probably dooming that portion of the business. Mergers, buy-outs, lay offs, all these things are done by people making more money in an hour than most of us on E will see in our entire lives, dictating policies that affect thousands of people. Coupled with slimy practices like Walmart where lots of employees are on food stamps just to survive, it feels like these corporations are squeezing people like juice from an orange and throwing them away.

I do think there's hope though because I do see lots of interest in r/AntiWork, where they point out these slimy practices and how companies are driving away their employees by being shitty. I'm lucky I work for a pretty good employer, but I've also had some really bad ones too.

[Jerram]

You asked a question.

China has largely proven otherwise. Maybe it will bite them.

Have you dealt with many investors? So fucking many of them are actively, wantonly ignorant. To the point of being offensive. Like some fucked up version of a baseball fan who only sees the stats and not the players or teams. Only this time the livelihoods of innocent people are at stake. This investment shield has enabled an immense degree of toxic behavior, and some degree of direct accountability may help things. Alternately, workers could have some guaranteed minimum say in the business they work for.

I have also met some quants who view themselves as being directly responsible for said livelihoods, and stress the fuck out about their clients. Which is all well and good, but... kind of fucked up that our society functions like this. Someone in New York provides the funds to get some corn into Atlanta - great. Is this really the best way?

I am hugely skeptical of how heavily financialized we currently are.

I'm not disagreeing with your point that business is capable of much evil.  My point is that while the form is capable of evil, it is not itself necessarily evil.  But the meme is "corporations are run by mustache twirling CEOs and their henchmen and are responsible for everything bad."  Your pool guy probably is or works for an LLC.  My plumber is part of a family business set up as an LLC.  My doctor works as "John Doe M.D. a professional medical corporation."  Whoever owns the local hardware store I guarantee isn't an individual.

An investor is anyone who buys stock with the expectation of return.  I invest in index funds, which is a way of spreading the risk and being managed by someone who knows more about the market than me.

If i invest in a company and it falls into bankruptcy or is judgment debtor, I'm on the hook only for the value of my shares.  If it were otherwise, there wouldn't be investors.  Without this kind of structure, money doesn't move.

[Annaamarth]

I'm not disagreeing with your point that business is capable of much evil.  My point is that while the form is capable of evil, it is not itself necessarily evil.  But the meme is "corporations are run by mustache twirling CEOs and their henchmen and are responsible for everything bad."  Your pool guy probably is or works for an LLC.  My plumber is part of a family business set up as an LLC.  My doctor works as "John Doe M.D. a professional medical corporation."  Whoever owns the local hardware store I guarantee isn't an individual.

An investor is anyone who buys stock with the expectation of return.  I invest in index funds, which is a way of spreading the risk and being managed by someone who knows more about the market than me.

If i invest in a company and it falls into bankruptcy or is judgment debtor, I'm on the hook only for the value of my shares.  If it were otherwise, there wouldn't be investors.  Without this kind of structure, money doesn't move.

Let me try my hand with a little bit of specificity.  This will be verbose and a little mansplainy, because I dislike skipping steps and because it helps me to keep my thoughts organized - please bear with me.

Corporations are not inherently bad.  What is bad is monopolization, corporate power, and the hierarchy ruled by the specter of infinite growth.  Now, I want to fixate on something you said:

An investor is anyone who buys stock with the expectation of return.  I invest in index funds, which is a way of spreading the risk and being managed by someone who knows more about the market than me.

Let's talk about Talmart or Warget.  These are big corporations who are run by Big Executive Very Serious People.  Talmart does the layoffs Gloom mentioned? A BEVSP signed off on it.  Warget cuts payroll hours at a seasonally underperforming store, knowing that's going to result in cut corners and shoddy maintenance of store conditions?  A BEVSP signed off on it.  But here's the thing - the BEVSPs aren't in charge.

Who runs them?  Index funds, hedge funds, market managers.  They move money around to support the best performing things, to make clients like you make as much money as possible.

So, now I'm going to talk about Walmart.  Everybody hates Walmart, it's easy to do, right?  Well, I worked for Walmart, so I know some things.  In fact, I worked in the back room of a Walmart, where Hazardous Material gets handled.  Now, if you pay any kind of attention to such things, you might recall that Walmart got recently dinged for mishandling a bunch of Hazmat in California.  Go Google it if the context helps, but I'm gonna move on.

Now, like I said, I used to work in the back room.  I can tell you that Walmart has very good Hazmat handling policies and procedures ... mostly.  They are very careful about how it gets shipped, specifically because it's so easy to screw up.  So, how did that mistake happen?  Well ... who was responsible for dealing with Hazmat?  As it turns out, the employee cleaning it up.  Whoever cleaned up the mess needed to dispose of it correctly.  This kinda makes sense, it's good to instill a culture of accountability - but what is HazMat?

Shampoo.  Nail polish.  Conditioner.  Any makeup.  Little bottles of flavouring you squirt into water.  Dish detergent.  Laundry detergent.  Batteries.  Flourescent light bulbs.

Some of those make sense, but you tell a near-minimum wage employee that a damaged, leaking bottle of the makeup she puts on her face every day needs to be dumped out and clumped with absorbent material, double bagged, and shipped to a waste facility, and what do you think she's going to do?  Spoiler alert: She laughed at me and left me to do the job for her.  This impacted my time on my normal tasks, which annoyed management because now the payroll was fucky.

Not all places have a Me though, particularly since I no longer work for the Waltons, so ... Hazwaste gets mishandled.  Whose fault is it?  Is it the undertrained, underhoured employee, or the corporation that has the excellent policies and procedures ... but shoddy execution at the store level?  Or is it because of the fund managers who make it necessary for a corporation to cut payroll, cut training budgets, and even allow an environment where employees feel pressure to put in time off the clock, even against managerial direction?

Or is it because of investors like you and I, who will invest in the best-performing, best-rated funds, and to whom those fund managers are beholden?

Welcome to "no ethical consumption under capitalism Corporate Structures 101".  The question "whose fault is this?" is meant to be a rhetorical device for closing the lecture, but you can submit a thoughtful response for that question for extra credit.

[GloomCookie]

Annaamarth, your post brought up so many memories...

I used to work at Store #23 in Ruston, Louisiana (I no longer live anywhere near there so I don't really give a shit about revealing this). While there, I worked in two places: Seafood and Hardware. Seafood was my home for a year before they shut down the fresh seafood in favor of frozen garbage but I totally get it, it just sucks. While I was there, we had very, very strict guidelines on how the floor was to be cleaned:
Take all trays off the rolling racks and Wash, Clean, Sanitize in the 3-comp sink (done first to get any... juices... onto the floor before we cleaned it)
Spray the floor with detergent to sanitize the floor.
Spray the floor with hot water to wash it into the drain.
Squeegee the floor to get all excess water into the drain.
Pull the drain cover, scrub inside the drain.
Replace drain cover.

Now. Let me detail what actually happened if I was on shift.
Take all trays off the rolling racks and Wash, Clean, Sanitize in the 3-comp sink (done first to get any... juices... onto the floor before we cleaned it)
Spray the floor with detergent to sanitize the floor.
Spray the floor with hot water to wash it into the drain.
Squeegee the floor to get all excess water into the drain.
Pull the drain cover, scrub inside the drain.
Replace drain cover.
Yes I know this needed done but... I had two departments to clean, give me a break.

How most people in the department cleaned.
Take all trays off the rolling racks and Wash, Clean, Sanitize in the 3-comp sink (done first to get any... juices... onto the floor before we cleaned it)
Spray the floor with detergent to sanitize the floor.
Spray the floor with hot water to wash it into the drain.
Squeegee the floor to get all excess water into the drain.
Pull the drain cover, scrub inside the drain.
Replace drain cover.

Yeah. Oh, and now let's talk about the Hardware department, which includes spray paint, paint, fluorescent bulbs, and a lot of other things technically classified as hazardous materials. Hahahahahahahahaha. Ha. Ok so yeah, I tried to follow procedures as much as possible, but that rarely ever fucking happened because I was responsible for three main areas: Hardware itself, Furniture (on the other side of the store) and Curtains, in between the two. And since day shift didn't give a toss about these areas and keeping them zoned, it became my job.

Half the time, I'd push along a cart with three things in it: returns (going to another department just left in my area), claims (broken shit) and a 5-gallon bucket with a trash liner in it. Daily routine was start with the lightbulbs because that was the place most likely to have broken shit. Pull the product forward, toss broken incandescent bulbs in the trash, carefully put the CFLs in the returns section, scoot down, repeat. My absolute favorite area (sarcasm) was the air filters, because for some fucking reason, every night I found the same stolen product: an empty package of glycerin suppositories. WHY?! WHY DID YOU STEAL THESE?! Someone must have been very constipated or had a fetish. Aaaanyway. That was pretty much how I operated. I would do my best to go by the book but I was, like Annamarth pointed out, a barely above minimum wage employee who was tasked to scoot along and clean up when some dipshit knocked a package of lightbulbs off the shelf in full view of me, looked at them, looked at me, looked at the bulbs, shrugged, and fucked off outta there. Yeah, fuck you too, guy.

Management and I didn't always see eye to eye because I did my best to keep the place clean, but when there's no support from everyone else in your department and management will absolutely jump your ass if you don't have it zoned properly, you cut corners. You cut so many corners that you end up with a circle.

[Annaamarth]

In alphabetical order, rather than chronological:

Accounting
Asset Protection
Claims
Deli (closing every night and yeah, I feel your pain vis-a-vis drains etc.; also, cleaning the damn fryers)
Pickup

Among others.  My time there was ... varied, and I had a great deal of opportunity to learn lessons that serve me in good stead today.  On the corporate side, I actually consider Walmart the gold standard for corporate professionalism - excellent procedures, well-written policies, easily available outlines of responsibility casually available on the company intranet.

Relevant storytime:

When I was called into the office for a castigation (as one occasionally is) for providing quality customer service rather than returning to my post in the deli to manage the next set of rotisserie chickens, I reminded management that customer service is part of everyone's job - and this customer had walked past three other associates, and one of the managers without having been addressed per policy.

When I was informed that the rules for customer service didn't apply to me as a deli associate, I pulled up my job description and pointed out where, in the corporate policy, it said it was.  I then lost my temper and asked "If this was not supposed to apply to me, why the fuck did you not tell me that when I started working in this position?"

I was told I could leave, then found myself working in a more customer-facing position afterwards.

The reason for this story is to underline my point - when the drive to meet the expectations of the spectre of perpetual growth force the store to cut hours (and corners) until an employee following policy as expected has to defend themselves to management further wasting payroll time, there are flaws in the system - and yet Walmart is a very efficient system.  So lean, it has cut to the operational bone.

I now work in a more technical field - semiconductor manufacturing - and Walmart is still my gold standard for corporate professionalism ... with all of those flaws I outlined.

That is why "corporations bad."  A gross oversimplification ... but adequate for casual conversation.

The local plumber's LLC, the local co-op, small businesses? Not necessarily the same problem - the big problem with small business has less to do with corporations and more to do with wage theft and other employee abuse - the pitfalls of unregulated business, rather than corporations in general.  Small businesses like this are unregulated because they are too omnipresent to enforce consistently, and because employees often succumb to pressure to 'meet expectations' out of a false loyalty - as you outlined so well earlier, Jerram.

[HannibalBarca]

Most corporations promote bad practices and no employee buy-in, because they're top-down systems.  They are inherently undemocratic.

Let me repeat that again:  Corporations as we know 95% of them are undemocratic.

In a democracy, the people (workers) choose the leaders.  Not the wealthy (investors).  Not oligarchs (board of directors).  When I see some people desire someone who's been successful in business to be a President, I roll my eyes.  A nation isn't run like a business--unless you're an authoritarian and desire a dictatorship, oligarchy, or kleptocracy.

This is where socialism has gone so wrong in many nations, like the USSR or China.  Socialism as an economic system requires democracy as a political system to function properly.  Without it, you're just another authoritarian nation.  Capitalism or socialism doesn't matter much if there is still a tiny clique at the top running things.

[GloomCookie]

The counter argument to that is that corporations are not meant to be democracies led by the workers but led by the people investing into the corporation. Some corporations, like the one I work for, allow employees to buy shares and become part of the democratic process, but the majority of decisions are still handled by the majority shareholders. I imagine even if I and every other shareholder besides the top 3 voted against something, but the majority shareholders did, we'd be outvoted. Is that terribly undemocratic? Not necessarily. Our shares represent how much personal stake we've placed in the company as a whole. I myself have 2 shares, while one of our members is getting ready to retire with almost 1,000 shares acquired over 40+ years of working there. Basically, it's how much money we personally have put into the company to make sure it succeeds.

And most corporations are like that. They are owned by people who have personal stakes in the company. The average employee doesn't have a stake in the company and probably doesn't care to. When I was 20 working at Walmart, I often thought how I'd do things differently, but at the end of the day I collected my paycheck and went home. I didn't give a damn about if work would be there tomorrow or what happened after I left beyond usually knowing I'd have to clean up the next shift's mess at some point. I didn't want to invest in Walmart, I didn't care who the CEO was, I didn't even care if there was creepy propaganda of Sam Walton everywhere. I just collected my paycheck and went home.

And that's the major difference I feel people don't quite understand. Employees have not invested their own capital into the company, and their major benefit from working there is a paycheck. It's a simple transaction: You give the company your time and receive compensation for that time. If you get fired or find another job, then that's it. Becoming an investor means you're putting in more than just your time, you're putting in your capital and actively putting stakes in the company beyond a simple time commitment. You are working towards the company's success in a more meaningful way. And that's when you do get a vote, even a small one, in the corporate decision making process. The number of votes you get is the investment you have put in to obtain a piece of that company. You literally own the votes because those are your personal stakes in the company. If the company does well, you do well. If the company fails, there goes your investment.

Where employees have rights is in forming trade unions and the like. Those trade unions use the collective bargaining power of all employees to put forward ideas and can leverage the weight of the employees to make things happen. In the unions the employees vote based on their own internal guidelines, which is great. But, the unions are still not owners in the corporation, and if necessary must resort to arbitration and strikes to try and make significant changes if necessary. The corporations go in with the understanding that, if push comes to shove, they don't really have to give the unions anything. They do because they want to keep employees happy, and know that unions can and often do put money in the pockets of politicians to listen to them when it comes to labor laws. That's where their power lies.

Let's look at a smaller example. Say I start Gloom Cookies, Inc. And I scrape together $10,000. Then I go around and find myself 9 other investors, each putting in $10,000. Cool, each investor has helped gain $100,000 in starting capital for Gloom Cookies, Inc. and each person has 10% of the total corporate assets. We buy the equipment, the location, ingredients, hire workers, etc. and I run the company for a year. Investor C proposes that I am not doing a good enough job, and chooses to put forward a new candidate for the position. Everyone votes, including me, since I have 10% of the total votes. Even if I get ousted as CEO, I still have my 10% investment, meaning that unless they move to take my shares, they still have to compensate me for those shares. As an owner, I have rights.

Now, let's say that I'm the CEO and I have 10 employees. I pay my workers above the state minimum wage and offer decent health benefits, but that's not enough and they form a union. Alright, I now must deal with the union instead of individual workers. The union puts forward a new benefits package that doubles current salary, gives them a health insurance package that makes Congress green with envy, and I must give each employee their check on my knees thanking them profusely for their work. I'm gonna tell them to pound sand, they have no right to demand such a thing from my company. They can go on strike in which case, fine, I'll shut down production until they realize their demands are ridiculous. If they come back asking for $1/hour raise and maybe include an extra procedure like Bariatric surgery in the health care package, ok that's something I'd seriously consider. I'd weigh the costs vs. current and future earnings potential and try to haggle them down like, maybe $0.50/hour and cover 75% of the surgery or something. It's give and take. But, the unions can't just demand anything from me, and after a certain point I can legally fire the workers for being unproductive if they go too long. Basically, the union has a right to exist, not to simply shut down production for unreasonable demands.

Two totally different systems, and not every industry works the same. This is a gross oversimplification, but you sorta have to be vague when talking about something broad like this.

[Chulanowa]

Just a quick one here; both the USSR and China were / are democracies. Quite vigorously so. They are single-party states, but those parties are made of delegates elected by and from the workers' councils (which are in turn directly elected by the people in a given division.) These delegates then choose the leaders of the party, the candidates for national offices, etc.

I know that for Americans, with our broad plethora of ideologically divergent political parties, absolutely robust system of popular representation, high degree of accountability in politics, and elections based on winning platforms rather than "we're not the other party!", such a system seems bizarre and repressive.

But. It's worked out okay for China, Vietnam, and Cuba, and it was working well for the Soviet Union until Yelchin started firing tank rounds at the Duma...

Most corporations promote bad practices and no employee buy-in, because they're top-down systems.  They are inherently undemocratic.

Let me repeat that again:  Corporations as we know 95% of them are undemocratic.

In a democracy, the people (workers) choose the leaders.  Not the wealthy (investors).  Not oligarchs (board of directors).  When I see some people desire someone who's been successful in business to be a President, I roll my eyes.  A nation isn't run like a business--unless you're an authoritarian and desire a dictatorship, oligarchy, or kleptocracy.

This is where socialism has gone so wrong in many nations, like the USSR or China.  Socialism as an economic system requires democracy as a political system to function properly.  Without it, you're just another authoritarian nation.  Capitalism or socialism doesn't matter much if there is still a tiny clique at the top running things.

[TheGlyphstone]

The proper term would be oligarchies,  not democracies, I think. The one party system works great for the 95 million members of the Chinese Communist Party, but the remaining 1.3 billion Chinese citizens have no say in their government and significantly less benefits. The USSR was the same - members of the Party were an elite caste that stood above the bulk of the common citizenry. When 93.3% of your population lacks a voice, that is not democracy.

[Dashenka]

Now, let's say that I'm the CEO and I have 10 employees. I pay my workers above the state minimum wage and offer decent health benefits, but that's not enough and they form a union. Alright, I now must deal with the union instead of individual workers. The union puts forward a new benefits package that doubles current salary, gives them a health insurance package that makes Congress green with envy, and I must give each employee their check on my knees thanking them profusely for their work. I'm gonna tell them to pound sand, they have no right to demand such a thing from my company. They can go on strike in which case, fine, I'll shut down production until they realize their demands are ridiculous. If they come back asking for $1/hour raise and maybe include an extra procedure like Bariatric surgery in the health care package, ok that's something I'd seriously consider. I'd weigh the costs vs. current and future earnings potential and try to haggle them down like, maybe $0.50/hour and cover 75% of the surgery or something. It's give and take. But, the unions can't just demand anything from me, and after a certain point I can legally fire the workers for being unproductive if they go too long. Basically, the union has a right to exist, not to simply shut down production for unreasonable demands.

I think this is the answer as to what is wrong with corporations. Unions with unrealistic demands and too much power.

It's all fine to ask for more wages and health packages and everything, making production more expensive. What happens when production costs rise? The profit goes down. When the profit goes down too far, the corporation will lose money and go out of business, putting all the employers with their high salaries and excellent teeth out of a job. Or, a more likely outcome, the corporation will sell their services more expensive, thus meaning the customers have to pay more.

I have asked my employees (I only have seven) to come to me if they need anything and leave the union out of this. I like to think that we can work something out together, without a union interfering. Unions in my experience have no interest in the longevity of the business or corporation, only in getting the best deal for their clients. Larger corporations can deal with them, they have the manpower and financial power to counter the unions. Smaller businesses, like mine, don't stand a chance against them.

Realistic, forward thinking unions are a great asset to society. They can protect employees from corporate greed, explain their rights and improve their lives. Unfortunately they can also destroy smaller companies by unrealistic demands. When all my employees get a 5% wage rise, which in Europe these days is not that extraordinary, I'd have to shut to my business down because I cannot afford them anymore. I'm very happy that there's no such thing as health packages here in the UK as I wouldn't know how to afford that for my employees.

Whether or not my employees' health is my responsibility or not is of course an entirely different matter.

[Vekseid]

The proper term would be oligarchies,  not democracies, I think. The one party system works great for the 95 million members of the Chinese Communist Party, but the remaining 1.3 billion Chinese citizens have no say in their government and significantly less benefits. The USSR was the same - members of the Party were an elite caste that stood above the bulk of the common citizenry. When 93.3% of your population lacks a voice, that is not democracy.

It's more kin to a theocracy, where adherence to the proper ideology is required to participate in leadership, plus an acceptable amount of party-approved differing opinions - at least for China. Pre-Stalin USSR could be argued to be more democratic, but it certainly was not after until much later.

More sinister is these confidence votes can turn very easily into a new type of census a la North Korea. You're not voting for the Kim, you are proving you are where you are supposed to be like a good little serf.

[Vekseid]

The counter argument to that is that corporations are not meant to be democracies led by the workers but led by the people investing into the corporation.

I find the notion that workers haven't invested to be ludicrous, personally.

One is investing a portion of their life and their capability.

The other is investing a token they've built up which only has value because everyone agrees it does.

Regardless, I believe there can be some happy medium between unions guarding outmoded jobs, and corporations being subsidized by proxy because they don't pay their employees enough to live.

And that's the major difference I feel people don't quite understand. Employees have not invested their own capital into the company, and their major benefit from working there is a paycheck. It's a simple transaction: You give the company your time and receive compensation for that time.

I feel you are the one who doesn't understand.

Financial capital is a fiction, as is all capital ownership. No matter what form it takes, it has zero inherent value.

If you get fired or find another job, then that's it. Becoming an investor means you're putting in more than just your time, you're putting in your capital and actively putting stakes in the company beyond a simple time commitment. You are working towards the company's success in a more meaningful way. And that's when you do get a vote, even a small one, in the corporate decision making process. The number of votes you get is the investment you have put in to obtain a piece of that company. You literally own the votes because those are your personal stakes in the company. If the company does well, you do well. If the company fails, there goes your investment.

Alternately, you can buy up a productive company, sell off its assets, fire all the employees, and let the husk go bankrupt. Who cares what lives it ruins, what communities it destroys.

You are more important because you have some magic numbers you can move around.

Now, let's say that I'm the CEO and I have 10 employees. I pay my workers above the state minimum wage and offer decent health benefits, but that's not enough and they form a union. Alright, I now must deal with the union instead of individual workers. The union puts forward a new benefits package that doubles current salary, gives them a health insurance package that makes Congress green with envy, and I must give each employee their check on my knees thanking them profusely for their work. I'm gonna tell them to pound sand, they have no right to demand such a thing from my company.

If you are so much of a dick that you cannot reason with ten people working for you, you deserve to fail.

This situation requires such poor judgement, on one level or another, that my only reaction here is - what right do you believe you have to their labor?

You don't, beyond what you have agreed with them. If they pull something like this, you either have the money to do it and they know it, you are worse than useless to the operation and they know it, or they lack wisdom and you hired them without a plan to correct this.

The common denominator here, in all cases, is you.

You could have done better. But didn't.

[Oniya]

A 5% pay raise 'isn't extraordinary' - that may be, but if your employees are having to deal with 9% increases in the cost of living (basics:  food, work attire, shelter, transportation), giving someone a 5% pay raise is actually giving them a pay cut. 

How will your business survive if your employees are getting evicted, or can't afford to get to work?

[Dashenka]

A 5% pay raise 'isn't extraordinary' - that may be, but if your employees are having to deal with 9% increases in the cost of living (basics:  food, work attire, shelter, transportation), giving someone a 5% pay raise is actually giving them a pay cut. 

How will your business survive if your employees are getting evicted, or can't afford to get to work?

Agreed, that is a juggle and a balance that companies and employees have to find. Sharing the load. Big companies can carry more of the load but they too have limits. It's all about balance.

[Annaamarth]

The counter argument to that is that corporations are not meant to be democracies led by the workers but led by the people investing into the corporation. Some corporations, like the one I work for, allow employees to buy shares and become part of the democratic process, but the majority of decisions are still handled by the majority shareholders. I imagine even if I and every other shareholder besides the top 3 voted against something, but the majority shareholders did, we'd be outvoted. Is that terribly undemocratic? Not necessarily. Our shares represent how much personal stake we've placed in the company as a whole. I myself have 2 shares, while one of our members is getting ready to retire with almost 1,000 shares acquired over 40+ years of working there. Basically, it's how much money we personally have put into the company to make sure it succeeds.

Here's the thing though - putting aside matters like "my time and effort for the company are, definitionally capital" - I never said anything about a corporation running like a democracy.  You have your shareholders - lets say out of 10 investors, you are one of them, your friend and business partner is another, four of them are people who strongly believe in your company and your mission and vision statements ... and four of them are hedge funds or indices.

Let's say you have a bad quarter, or even a decent-but-not-great quarter.  You and your business partner are invested on a deep level, and you have four true believers ... but those fund investors are looking for new places to put their capital, so they divest themselves and invest in that other company that has shown slightly better capability to achieve growth projections.

You're now sitting at 60% of your original investment, and you're fucked.

Now, I'm fully aware that this isn't how the market works on the small scale, but that investor pressure to achieve the goal of infinite growth is absolutely what drives C-level decisions from Walmart to Intel to ABB to Ford, and how Lean, kaizen and Six-Sigma get misapplied in a way that cuts the companies ability to maintain.

Training departments get cut in order to reduce staffing requirements, because most of the training is OJT anyway, right?  But now there's no tech-writer on staff, so the procedures that are written internally for using such and such piece of equipment start to degrade and suffer.  Errors are introduced and normalized deviation sets in - that's a thing you've almost certainly seen in your workplace, Gloom - most people have.  Glossing over steps of a procedure because "that step doesn't really need to be done every time."

That, incidentally, is what killed the Challenger space shuttle, and it results in industrial accidents all the time - because training is expensive, and it isn't made a priority investment - because it's so easy to cut to save the growth numbers on a bad quarter.

[greenknight]

Whether or not my employees' health is my responsibility or not is of course an entirely different matter.

One the auto industry decided almost a century ago, along with pensions, in dealing with the UAW. The union was all in on providing these benefits while the Big Three wanted to provide them as a way of limiting job mobility and protecting trade secrets (from their colleagues, natch.) You leave Ford for GM and you have to restart everything from 0. As the biggest employer group and union of the time went, everyone went, to include employment law.

[GloomCookie]

If you are so much of a dick that you cannot reason with ten people working for you, you deserve to fail.

Unions exist across several businesses both big and small. The National Labor Relations Board points out that a union can exist with just one employee. All that is required is that the union is registered and recognized and it is no longer in the hands of the employees or the employers, and since employers cannot legally interfere with the creation of a union, then the matter would be out of my hands. I could be the best damn boss ever, but if 6 of those 10 employees (majority) demand a union, they have every legal right to create one.

Financial capital is a fiction, as is all capital ownership. No matter what form it takes, it has zero inherent value.

The same could be said for the $1 bill I have in my hand. The bill itself has no inherent worth, but it does have worth based on what I and the person I'm bargaining with says its worth. Financial capital is the same way, in that it is considered to be worth a certain value and thus can be used as a medium of exchange.

Alternately, you can buy up a productive company, sell off its assets, fire all the employees, and let the husk go bankrupt. Who cares what lives it ruins, what communities it destroys.

You could certainly do that and yes, it does happen. Or, the business could go bankrupt, or be required to downsize in order to stay afloat. There are tons of 'what ifs' out there, and this absolutely happens to businesses all the time. Just because it's entirely possible that an investor might buy up a company and sell it off again just to squeeze profit out of it doesn't mean that's all that investors do. Some investors see potential in the business to succeed in the future and that their investment is worth more long-term than simply squeezing its current assets now.

Alternatively, it could be that a company was already failing and this actually helps hasten its demise. It absolutely sucks, but it does happen. Take the coal industry in England in the mid-80's. Prior to this, the only reason British coal was being mined in such large quantities was because they had a market: the British government. However, that was their only customer, as other sources around the world were producing more coal for less money. Keeping that industry afloat was a burden on the average UK tax-payer, and so when the government stopped buying coal, most of those industries folded. With them went the towns and communities that had built up around them. It sucks, but that's what happens when an entire town devotes itself to a single industry.

I should know, since I grew up in a tiny town centered around a papermill and sawmill. The sawmill closed shortly after I left highschool, costing the town 700 jobs. The town was already on the decline since the 80's, and the papermill continues to downsize. There are other industries, certainly, but the town itself is a shell of its former self. That wasn't the fault of some investor somewhere, that was changing market forces that forced the company to fold up its sawmill operations because other companies were making product that was cheaper in the grand scheme of things.

A 5% pay raise 'isn't extraordinary' - that may be, but if your employees are having to deal with 9% increases in the cost of living (basics:  food, work attire, shelter, transportation), giving someone a 5% pay raise is actually giving them a pay cut. 

How will your business survive if your employees are getting evicted, or can't afford to get to work?

I agree that it absolutely sucks right now, but the company must also deal with inflation on their end. The company is only responsible for paying the employees, not for how much their food and other necessities cost. That is something that needs to be worked out between the employees and the employer, and if it's that bad it might be something the government needs to look at as well. Unless we want to go back to the horrific practice of company towns, there's not a lot an employer can do but give a pay raise and hope its enough to keep the bulk of their employees on board.

Here's the thing though - putting aside matters like "my time and effort for the company are, definitionally capital" - I never said anything about a corporation running like a democracy.  You have your shareholders - lets say out of 10 investors, you are one of them, your friend and business partner is another, four of them are people who strongly believe in your company and your mission and vision statements ... and four of them are hedge funds or indices.

Let's say you have a bad quarter, or even a decent-but-not-great quarter.  You and your business partner are invested on a deep level, and you have four true believers ... but those fund investors are looking for new places to put their capital, so they divest themselves and invest in that other company that has shown slightly better capability to achieve growth projections.

You're now sitting at 60% of your original investment, and you're fucked.

Most companies that have major investors also have agreements in place on how and where large stakes in the company can be sold off. The bulk of companies don't have a presence on the stock markets of the world, and so assets are privately owned by the investors. Because such a large stake could absolutely cripple operations, usually the company will have some sort of safeguard in place to allow them to purchase the shares owned by the investors trying to depart, either by having another investor personally purchase the shares or having the company buy the shares and basically dissolve those shares, meaning that now you have a ~15% split of the company between the six remaining investors. You have to have such safeguards in place because what happens if an investor dies? Such contingencies are addressed in most investment agreements.

Now, I'm fully aware that this isn't how the market works on the small scale, but that investor pressure to achieve the goal of infinite growth is absolutely what drives C-level decisions from Walmart to Intel to ABB to Ford, and how Lean, kaizen and Six-Sigma get misapplied in a way that cuts the companies ability to maintain.

Yes, that drive for infinite growth in a finite market is what's costing Netflix dearly right now. Most stocks fall into one of two broad categories: short term and long term. Everyone loves the growth potential of short term stocks but they're also highly volatile, while long term investments pay off over longer periods of time. This is what hedge funds love to use so they can continue to grow things like retirement funds and the like. Because ultimately, hedge funds are just large pools of money operating not too dissimilar to a corporation to grow the assets of the money pooled, but most hedge funds are basically people like me who put money into a 401k that then gets invested into the stock market and into companies that show potential. I just farm the job out to someone who is investing based on the interests I've defined, based on the projected future growth. So yes, I suppose I'm one of those horrendous people who is causing so much ill will towards investors by putting in my meager amount of money trying to save up for retirement one day, since I doubt there'll be anything left in Social Security by the time I retire.

Training departments get cut in order to reduce staffing requirements, because most of the training is OJT anyway, right?  But now there's no tech-writer on staff, so the procedures that are written internally for using such and such piece of equipment start to degrade and suffer.  Errors are introduced and normalized deviation sets in - that's a thing you've almost certainly seen in your workplace, Gloom - most people have.  Glossing over steps of a procedure because "that step doesn't really need to be done every time."

That, incidentally, is what killed the Challenger space shuttle, and it results in industrial accidents all the time - because training is expensive, and it isn't made a priority investment - because it's so easy to cut to save the growth numbers on a bad quarter.

Let's take an extreme example like engineering, where we go to school for 4 years. Guess how much exposure I had to the type of work I currently do? 1 quarter (equivalent to a semester). That's about it. Sure there were other classes that cover it, but the bulk of everything I've learned about my job was on the job training. And you are absolutely right that a lot of companies suck at on the job training or getting formal training to those that need it. When such cases occur, they pay for the short-term benefits with long-term issues. Training is expensive and it's time consuming and there's a laundry list of reasons why training isn't done, and everyone suffers as a result.

In the case of the Challenger space shuttle and in industrial accidents, cutting corners absolutely kills people. I will push constantly for training but I have no authority over my fellow employees. That decision to invest in training comes from management, and if they're not willing to invest, then it's on them. Most companies have a QA department for a reason, but I've also seen an attitude of “Oh look, QA has a problem AGAIN and a general attitude of not giving a damn. That smacks of low morale and a bunch of employees who know they either don't have the ability to do it right (from either lack of tools to lack of knowledge) and knowing they can only cover up the problem or put a patch on it since management isn't going to invest properly into them.

[Oniya]

There were a number of factors that led up to the Challenger disaster - including NASA trying to remain 'useful' after the push to the moon.

But if you don't believe me, this guy might be more cogent.