Pensions to Convert Large US Firms to Full Employee Ownership

If we could take the US Fortune 1000 and convert them to full ownership by employees or the families of such people that would go a long way toward emproving profit efficiency and getting firms with sane ownership that wasn’t in the way and would allow a longer term horizon and better value and quality focus. This would mean a lot of the stock was at some point held by surviving spouses or retired employee who could of course divest at any point, but also by current employees. Managers and executives would be barred from holdings, and if they promoted into these positions would be divested or have the holdings frozen and voting rights cease until they retired or demoted- eventually only employees and former employees would hold stock and the firms would be taken private. This approach would require a change in the tax code.

These are pensions so they wouldnt have a bet the farm approach, and over time retirees would end up with chunk of holdingd in the firms they retired from and a chunk in high grade bonds and the rest in small and mid cap firms- over time outside large cap would be less available.

Not very good portfolio diversification.

One large employee owned company here in my neck of the woods went bankrupt after some sexual harassment lawsuits, and the employees lost nearly everything. Owning mutual funds is much safer for retirement plans… If you ban those, as you are proposing, then nearly all US retirement plans will be broken. Many companies are owned in huge part by Public Employee Retirement Plans.

That is a sample of one. Look at Mondragon. The criticisms are vestment and responsiveness to customers. Both are weak criticisms.

Mutual stock funds are the problem, they cant work over the long or medium term. They end up as default indexes by virtue of their size and as a group they rain down money on listed firms no matter what they do and we end up with such broken signals that we subsidize corruption to the point of collapse. If mutuals were allowed to outright buy firms and appoint the boards even through hostile take overs even that might be going in the direction of better signals but as they are, they are a scam and the core of stock market corruption. Mutual bond funds that buy higher grade bonds or mutuals that buy underlying or more tangible assets as the majority of their holdings are by degree holding on to some legitimacy.

Another thing Warren wants to ban.

Number 300 on the list.

Investing massive portions of your wealth in one company is risky. Period. Companies rise and fall.

The Fortune 1000 is trying to weasel out if pensions and the mutual fund ponzi scheme isn’t sustainable. Whereas this would be equity for people who have skin in the game regarding the organization and actually know something about it as opposed to people who just want canabalize a firm, hollow it out, cheapen its products and services for short term gain and act quite entitled in their attempts to undermine society.

Public employees should have never been subjected to a system that subsidized investment and relied upon 8% returns, it should have just be pure tax input reverting to state or federal when local or state government couldn’t maintain its tax base ans tried to default. The pure criminality of defined contribution never should have been allowed.

Work comp fees shouldn’t have been handed over to insurance companies etc. In CA Geico is sucking down 10 billion in revenues per year that used go to injured workers. More Republican criminality. A more educated population would have gotten rid of the GOP in the 60s before the Nixon disaster. Tea Party victims incessantly whine about Roosevelt and the New Deal but it was Nixon whi snuck in the mechanism of their castration.

Pensions are also a ponzi scheme. Nobody has offered pensions for new employees for quite some time aside from a few Fortune 1000 companies. Nearly all retirement programs for small businesses are 401k mutual funds. So which is it? You want huge sustainable companies that can afford to pay pensions? or small less powerful companies that can’t and don’t?

The scheme you are proposing is also a ponzi scheme – only with no diversification of risk. Rather than owning hundreds of companies that may go up or down, but on average are likely to sustain value, I get to own one. That may go up or down with little guarantee…

Answer that question. You are the one being a weasel and avoiding the key question. You really want to rest your future on the success of a single firm? Do you think anyone should? Absolutely no financial planners will say the answer is yes.

No public sector still offers new employees pensions and not the defined contribution or 401k crap. And I suggested half the holdings be in the firm and the rest in tangible assets, and that this be enough to fully capture ownership ond control of the fortune 1000 making them much more reliable and less prone to doing stupid things with money. I also dont have a problem with firms paying as they go outcof current year revenues to support surviving retiree pensions. Further I have no issue will social security and it would be the fall back to be funded at much greater than then the CPI change.

The actual choice is between this and making firms pay the wage rate that actually creates competors instead of under paying.

The public sector isn’t self sustainable. It needs to take money from businesses in order to perpetuate itself. So what the state does is rather irrelevant to what the private sector must do because the private sector must self sustain whereas the public sector doesn’t need to be sustainable at all.

And you are incorrect. Many if not most states are pushing new and existing employees towards retirement plans that are less defined benefit and are more investment oriented.

You keep piling on more irrelevant arguments and fail to address the diversification question. What tangible assets? 401k plans and PERS plans are some of the biggest shareholders in many fortune companies.

No I am not mistaken, and the idiot states are attempting to break their contract obligations and failing to tax. How is that working out for Detroit? Its like these billionare bankers who helped engineer the financial collapse now trying to the gov for 100 billion and the ability to reasert dividends. That is just pure crime like the attempt to scam public sector retirements. In the private sector a Bush or possibly Clinton tax change allowed any cost cutting to be recognized as profit and corrupt CEOs in order to trigger their bonuses reached into the private (private not public)sector fully funded pension accounts and stole that money. So the private retirement theft occured first and still needs prosecution and may get it if these fools canr make their crime universal across sectors. It would be no different then these clowns reaching into their employees private bank accounts. But this happened under the Bush admin so the sponsored media did not cover this retirement theft. It wouldnt be much different than the state reaching into the asset pools of billionaires and the Fortune 1000 and confiscating all the assets and income of each for the next 20 years. Its that level of crime and corruption and it was accompanied by Bush’s disproven idiocy about not being able to afford social security. Who couldnt afford it? Non earned income billionaires?

Yes its time to roll back every single aspect of the Powell memo, it was the blueprint for reversing the outcome if the civil war and bringing back the plantation. The Right has nothing left, only clowns like Palin, Romney and Walker.

Nope, That wasn’t what I was talking about at all.

And you still have not addressed my arguments…

No, I disagree I think your questions have been adressed.

The bigger problem with replacing Wall Streets income with this type of employee income is the stock would be highly illiquid. Only availble for purchase during an employees working years and needing new employees to come into the employment pool or sufficient current buy from present employees to allow families and ex employees to divest.

No they haven’t. But I assume that nobody is reading this but you or I, so I won’t waste any more time on it. If anyone else cares they can judge for themselves.

All in all you are forcing people into bad investments while reducing their freedom to make good investments.

Not so fast. It looks like the data support my position not yours. http://www.forbes.com/sites/maryjosephs/2015/04/07/how-employee-ownership-is-crushing-other-retirement-plans/

I thing getting rid of sponsorship and converting the fortune 1000 to full employee ownership and taking them back private plus widespread SAFE (+ with SAFE OS) on end user owned and controlled mesh might cover most of our problems.

Forbes is frusterating, sometimes it still has great stuff but increasingly its pure trash, not even tabloid quality.

I didn’t say employee ownership isn’t a good idea. I said that it is unwise according to nearly all experts to have more than 10% of your wealth wrapped up in a single company. 401k’s are not very liquid – and they provide the diversity needed to have a healthy retirement.

Especially if it is your employer-- Bad times lead to stock price drops and employee layoffs… That means if you are over-invested you can lose both your income and the bulk of your savings in one quick swoop.

ESOP plans are usually profitable. No doubt there – You usually get to buy at the lowest price of the quarter or something like that – It is nearly a guarenteed win if you sell right away.

But on the other side, Stock options are very frequently the very juicy carrot used to entice workers to endure a very brutal stick…

The employees who benefit the most from them are the ones who have the most to invest – The CEO’s and upper executives… So, while it isn’t bad for the little guy, it is still a big huge bonus for the ‘tyrants’ at the top… It still doesn’t change their incentive structure…

The funniest part is @warren citing an article with the disclaimer at the bottom: “Mary Josephs, former head of ESOP advisory at Bank of America, is founder and CEO of Verit Advisors, investment bankers specializing in ESOPs. You can reach her at CEO@verit.com.” Duh, what do you expect her to say?? Where is your discernment about sponsorship now? Oh, it is okay when it supports your case?

In short.

Employee ownership. Fine with me. The more the better.

Forcing people into illiquid investments. More Tyranny proposed by Warren.

Forcing companies a particular ownership model. More Tyranny proposed by Warren.

Banning Mutual funds. More tyranny proposed by Warren.

[quote=“Warren, post:1, topic:4057”]
Managers and executives would be barred from holdings
[/quote] More Tyranny proposed by Warren.

On and on it goes. Nobody is free in Warrenworld. They have to live how Warren says they have to live, invest in what he says they can invest in, hold it as long as he says to hold it. On and on. I like freedom. I hate tyrants.

Where is the will in a firm like AT&T that says it doesnt want to be 100 employee owned.

You might want to brush up on the concept. When its done right management and executives dont get to hold any equity, they are the hired help. Its bottom up through the board. They dont experience the volitilty or bankruptcy like profit first firms. The economist Richard Wolfe has begun to work on them as the best prospect for power sharing or democracy at work or in the larger society. Id say that by the time a firm is a blue chip the possibly visionary founder has shoved off and a firm should wholly employee owned. As the article points out there are still outside investments that do balance a portfolio in these firms, but if scaled up it would get rid of a chunk of the clout and manipulation and money of an investor class and fix the pension system. We dont need stupid risk first systems employees risk enough by showing up for work. This is recompensing the right people not mere rent seekers.

And I did make the typical more recent Forbes criticism.

I don’t buy it. Markets get disrupted and companies are no longer needed.

Blockchain technology threatens to disrupt a massive portion of the financial sector – It doesn’t matter what the ownership structure is – If there is no longer a need for what you do, your company is not going to make it. 9% of GDP is going to the financial sector. Let the blockchain Kill the middleman and get a massive portion of that money doing more productive things in the economy… It doesn’t matter what the management /ownership structure is — If the technology comes to fruition, these companies will no longer be needed.

Would Blockbuster and Hollywood video be thriving today if they where employee owned? No. Would an employee owned company lobby the industry to keep netflix and redbox down? Yep… Businesses have the same interests no matter who owns them…

Companies come and go, not because management is evil… But because a companies mission last as long as there is a market for it.

The Crypto revolution will fix this problem with freedom… Your proposal replaces one tyranny with another.

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I actually like the sound of that.