This is very well said. Capitalism isn't an ideology like socialism or communism, it's what naturally evolved out of our desire to trade with one another. Companies compete on the market, and the owners of them become wealthy (or not) in the process, but how the company is configured on the backend doesn't really matter to that process.
This is very well said. Capitalism isn't an ideology like socialism or communism, it's what naturally evolved out of our desire to trade with one another. Companies compete on the market, and the owners of them become wealthy (or not) in the process, but how the company is configured on the backend doesn't really matter to that process.
However, we are starting to realize that there are alternative ways of configuring companies on the backend that might be better, and there are things our governments can do to incentivize those models (even while the other ones still exist.) Until now, there has been an incentive to wind up with the "owners and employees" model because of the simple fact that the other models didn't exist as a business structure. At some of its subsidiary plants in China, for example, Mondragon isn't legally able to make those plants cooperatives so they have to give those workers their "profit sharing" through annual bonuses. Cooperatives and employee owned businesses only started getting these incentives in the last few decades!
Thankfully, I think we are starting to see these as better alternatives and we are seeing that reflected in government policies!
I actually think that employee owned businesses are much more common than we are usually aware of. It is easy to look at cooperatives like Mondragon, and notice how different they are, but employee owned businesses are actually all around us and have been around since the start of capitalism. They are just not noticed, because they are largely reserved for high-skill/high-compensation businesses, like law, accounting, finance, and medicine.
General Partnerships are a very (if not the most) common way to structure businesses composed of high-skilled individuals, and are all around us. There may be some variation in their structure, some with all employees as partners and some with distinction between partners and salaried employees, but all are without external ownership.
Some, like Venture Capital, even have found ways to get outside investment without giving up ownership and control. They do this in the form of Limited Partners (LPs), that invest money in the business to get a share of the profit, but without getting any say in how the business is run.
I think it could be very interesting to do a deeper dive on the similarities and differences between this and the co-op model. There might be a more encompassing model to be found in the intersection.
It's true that there are plenty of cooperatives and employee-owned businesses, but that doesn't make them common. Today there are roughly 6,322 employee owned companies in the US. There are 1,030 in the UK. And as I show in this post, there are only 11.1 million worker-owners globally, out of 3.39 billion total workers—that’s only 0.33% of the working population. Very miniscule.
General partnerships are interesting, but that doesn't mean they provide equity to employees. There are certainly prominent tech companies that do, and you're right that it would be great if we could include some of those in our stats—I'll look into that. Still, most equity packages are reserved for senior employees, not all employees. And at private companies most employees won't see the benefits of that equity unless the company sells or goes public so it's kind of imaginary until then. But you are very right that it's a segment worth investigating.
I think that General Partnerships are easily overlooked as a model of employee ownership. Alone in the US there are approximately 450.000 law firms (and then there are also all the accounting, finance and medical parctices structured like this).
With law firms, they are actually required by law to be partnerships, as they can only be owned by lawyers, so there can be no outside investors. It even goes further than this, in that in most firms only practicing lawyers can be partners, so if you stop working you have to transition to an "in counsel" role, where you no longer have ownership.
Ironically, this is probably the most anti-capitalist model you can think of, in that only actual workers can be owners, with no room for participants that only offer capital.
This model is easily overlooked, since it can seem a bit elitist, being mostly used in the highest earning segment of business, and also because partnership is rarely extended to all employees (it would be a rare firm where even the receptionist was a partner as well). But there is no intrinsic reason that this couldn't be the case.
It is an interesting model because it has a long history and all the legal infrastructure in place. Almost every country allow general partnerships or something very similar. And in contrast with cooperatives, it has no problems attracting very highly skilled employees.
This is very well said. Capitalism isn't an ideology like socialism or communism, it's what naturally evolved out of our desire to trade with one another. Companies compete on the market, and the owners of them become wealthy (or not) in the process, but how the company is configured on the backend doesn't really matter to that process.
However, we are starting to realize that there are alternative ways of configuring companies on the backend that might be better, and there are things our governments can do to incentivize those models (even while the other ones still exist.) Until now, there has been an incentive to wind up with the "owners and employees" model because of the simple fact that the other models didn't exist as a business structure. At some of its subsidiary plants in China, for example, Mondragon isn't legally able to make those plants cooperatives so they have to give those workers their "profit sharing" through annual bonuses. Cooperatives and employee owned businesses only started getting these incentives in the last few decades!
Thankfully, I think we are starting to see these as better alternatives and we are seeing that reflected in government policies!
I actually think that employee owned businesses are much more common than we are usually aware of. It is easy to look at cooperatives like Mondragon, and notice how different they are, but employee owned businesses are actually all around us and have been around since the start of capitalism. They are just not noticed, because they are largely reserved for high-skill/high-compensation businesses, like law, accounting, finance, and medicine.
General Partnerships are a very (if not the most) common way to structure businesses composed of high-skilled individuals, and are all around us. There may be some variation in their structure, some with all employees as partners and some with distinction between partners and salaried employees, but all are without external ownership.
Some, like Venture Capital, even have found ways to get outside investment without giving up ownership and control. They do this in the form of Limited Partners (LPs), that invest money in the business to get a share of the profit, but without getting any say in how the business is run.
I think it could be very interesting to do a deeper dive on the similarities and differences between this and the co-op model. There might be a more encompassing model to be found in the intersection.
It's true that there are plenty of cooperatives and employee-owned businesses, but that doesn't make them common. Today there are roughly 6,322 employee owned companies in the US. There are 1,030 in the UK. And as I show in this post, there are only 11.1 million worker-owners globally, out of 3.39 billion total workers—that’s only 0.33% of the working population. Very miniscule.
General partnerships are interesting, but that doesn't mean they provide equity to employees. There are certainly prominent tech companies that do, and you're right that it would be great if we could include some of those in our stats—I'll look into that. Still, most equity packages are reserved for senior employees, not all employees. And at private companies most employees won't see the benefits of that equity unless the company sells or goes public so it's kind of imaginary until then. But you are very right that it's a segment worth investigating.
I think that General Partnerships are easily overlooked as a model of employee ownership. Alone in the US there are approximately 450.000 law firms (and then there are also all the accounting, finance and medical parctices structured like this).
With law firms, they are actually required by law to be partnerships, as they can only be owned by lawyers, so there can be no outside investors. It even goes further than this, in that in most firms only practicing lawyers can be partners, so if you stop working you have to transition to an "in counsel" role, where you no longer have ownership.
Ironically, this is probably the most anti-capitalist model you can think of, in that only actual workers can be owners, with no room for participants that only offer capital.
This model is easily overlooked, since it can seem a bit elitist, being mostly used in the highest earning segment of business, and also because partnership is rarely extended to all employees (it would be a rare firm where even the receptionist was a partner as well). But there is no intrinsic reason that this couldn't be the case.
It is an interesting model because it has a long history and all the legal infrastructure in place. Almost every country allow general partnerships or something very similar. And in contrast with cooperatives, it has no problems attracting very highly skilled employees.