Contribution Factor Theory

With ever growing friction between the wealthy and the poor, many try to place blame on the elusive 1%. But what is the real problem here...why were they able to acquire such a disproportionate amount of wealth in the first place? Put simply, the answer is: capitalism. We all allowed them to become so rich by working in a system which promoted inequality. There is no one else to blame but ourselves.

So now you may wonder how do we shift out of a capitalistic system to one where wealth can be more evenly distributed. Well I think you don't necessarily need to scrap the old system to bring in some serious changes. In a capitalistic system, the business world is seen as a sea of potential where anyone can make it big time if they have the right idea. This is where the problem begins.

Corporations are considered separate legal entities from their owners, they can even take on debt and sign contracts. For this reason, it is literally illegal for the owners to consciously act in a way which would harm or destroy the business. Apart from the minimum wage, there is no law which ensures the human beings who keep the heart of the business pumping will get payed fairly so that they may have a reasonable standard of living.

In fact a corporation has no reason to make sure it's profit is fairly distributed between employees, a business is considered to be succeeding when shareholders are increasing their profit whilst minimizing all other costs, including the cost of paying employees fairly. That means shipping the work offshore and a range of other cost cutting techniques.

It comes down to the fact that you either have ownership of a business or the business owns you. As an employee you are literally an asset to the business. Cutting costs can include liquidating assets which are too expensive or a burden to the business. It can also include minimizing employee payouts until the wages are verging on slave labor.

It promotes massive inequality where the rich keep getting richer and poor keep getting poorer. You need to be in it to win it...as it were. A dog eat dog world. That's capitalism. Anyone can make it big but few ever do. Most people are simply working for the dogs. And this is where the true problem is. The elite business people aren't playing a fair game in my books.

They may claim they have earned their wealth through hard work and good leadership, but the reality is the majority of their wealth has been generated by other people who they hired to do the work. They may own the business, but this type of pyramid power/wealth structure is a problem that pervades many aspects of our society.

I propose a different business model, where there's not only heavy focus on the health of the business, but also on the health of the people the make up the business. This means shareholder profit is either non-existent, or virtually non-existent. This could be achieved in a number of ways that don't necessarily require the obliteration of shares.

Ownership of a business will simply equate to decision making power, it does not mean massive profit. The wages of all employees (including the owners, executives, and managers) are dictated by an equation which measures their output, work time, as well as the complexity of their work and the quality of it with respect to the complexity.

C = complexity of work (1-10)
Q = quality of work (0-1)
O = work output (0-1)
T = time working (hours)
F = contribution factor

F = (OT) x (CQ)

By multiplying time by an output fraction between 0 and 1 (where 1 would highest work output of all employees), the result is a value that represents the "real work time". The 2nd part is the complexity (10 being the hardest work) multiplied by a quality fraction (where 1 is the highest quality), resulting in a value representing how hard their job is and how well they do it.

Then you multiply those two numbers together to get the overall work contribution of that particular employee. Please note that if you only had one employee their work output would be 1. If you had two employees and one worked half as much as the other, the work output values would be 0.5 and 1 respectively. If both had the same work output it would be 1 and 1.

Now to figure out how much the employee actually deserves to get payed in relation to their contribution factor, you need to get the sum of all the contribution factors for all employees. Next calculate your profit minus all expenses, except the cost of wages/salaries. The following equation will give you the dollar value of each employees contributions.

F = contribution factor
P = profit going to wages
S = sum of all factors
V = $ value of contributions

V = (F/S)P

How often you need to assess your employees and use this equation will depend on how often you pay your employees. You can also work out how much the average employee wage will be by plugging the average contribution factor into that equation. There would also be a minimum wage to ensure that if profits were too low employees would still get payed, but only if not in too much debt

So that is my simplistic idea. And it is simple. Just one way to pay employees fairly based on their contributions. Unfortunately, not many business owners will like the idea of operating their business like this, because it means much less profit for them. Only fair and respectable business owners would operate a business like this.

Any business that uses this structure will attract a high number of sse7r[5semployees due to the above-average rate of pay. They will also produce extremely quality work in small amounts of time due to the incentives. Giving employees freedom to work how they want to work will also increase productivity. Google has a thing where one day each week employees can work on what ever they like. Use the new business ideas.

The end result will be a business with a service and/or product that is far superior in comparison to competitors who are still stuck in the dark-age. A fictional legal entity is treated with more concern than real human beings. People expect to sustain their livelihood by working for businesses, they deserve some degree of fairness that doesn't steal their life away for nothing.

No interest from anyone? Well I'm off to sleep then.

I'll check back later folks.

Not a single reply or flag yet?
I've written much worse threads. Give me a break.

I can start some discussion.

good OP.

Some companies actually do similar distributions as bonuses.

Trouble is, many times it's only the top echelon getting the cut.

Unions are out of style right now, but some contracts have a bonus structure for the hourly employees.

"Bonus" is a dirty word lately with all the focus on big Wall Street outfits being singled out.

Another problem is the absentee stockholders that "own" the corporations through anonymous investment holding companies.

The big holding companies have staff agents that monitor all the financial activities of each corporate entity under their control. Their job is ensure that as much money as possible gets funneled back into the holding tanks, to be re-invested or distributed to the anonymous "owners". This is why much of the "wealth" generated by big corporations never seems to find its' way back to the local citizens, and always seems to "disappear" into thin air. Generated "wealth" is actually the result of exploiting the resources available at all levels and in all forms.

Many large corporations' "boards of directors" and high ranked "officers" (ceo's, treasurers, etc) do not own enough stock to have a forceful say in matters that directly affect the bottom lines.

Research can uncover who these holding companies are and who they own.
State_Street_Corporation is one good example.

You will find that a few dozen large outfits like STT are the ones controlling a majority of big corporations.

These are international players and may very well be in the higher rankings of TPTB.

Some of the same agencies are the ones controlling governments also, as most governments are corporations too !

Your theory actually works with low level smaller businesses, as the "owners" are present and accounted for !!

to be continued......

reply to post by xuenchen


Thanks for replying! I thought this thread was going to drift off into oblivion without a single reply.

Your theory actually works with low level smaller businesses, as the "owners" are present and accounted for !!

Yep, of course it works...and it would result in very happy employees instead of just a few super-rich shareholders. I strongly believe in a society based on helping each other out more. We're all so greedy that we think it's ok to let the masses suffer just so a few can indulge in their excessive wealth. It's time to start caring imo.

There are and have been companies where the employees actually own the company.

Some are private and some trade on the exchanges.

Have to look for details.

Your system, or something close may actually be in use somewhere.

Harley Davidson maybe ? can't remember.

A railroad somewhere ?

Some may call this a profit sharing plan.

I am completely against this system we have in place now, but we can in no way call it "capitalism" and it is not the problem.

What we have now is not a capitalist society. It is a collectivist system. Strictly defined it would include a socialist outlook, but that would only apply to that 1% as being part of the collective.

The wealthy and politicians look out for their collective interests and decry any attempt to purge the system and restore it to it's original capitalist roots.

Capitalism is dead......collectivism is alive and well!

here are some links.


Employee Bonus Plan Agreements


List of employee-owned companies


maybe we can sift through and find some similarities.

some companies use stock options as a "bonus", but those are based on the stock price, not necessarily the employees' performance, and it is always long term before getting paid.

reply to post by ChaoticOrder


An incentive-based program would be interesting.

Your OP had math. Math scares people. Hence the lack of replies.

Lemme ponder on your thread, before I wholy endorse it, but interesting nontheless.

reply to post by xuenchen

There are and have been companies where the employees actually own the company.

Yeah that doesn't surprise me. But I bet there aren't a whole lot of them. My idea will let the ownership remain with a few people, but the profits will be distributed more evenly. Move away from the typical success model which directs huge amounts of the profit into the pockets of shareholders, and put more importance on the employees which actually keep the business running. All it requires is for the owners not to be greedy, and take a cut of the profit which represents their contributions. I mean they will obviously take a bit more than what they pay their employees, but it should be fair in comparison to what employees are being payed. If all businesses where to use their profits fairly and pay their employees in a fair manner like this, we would all have a relatively high standard of living. The single most powerful factor contributing to poverty and scarcity is the absurdly uneven distribution of wealth.

reply to post by ChaoticOrder
Honest question.
What is stopping people from becoming shareholders now?
People can enhance their income by buying into a corporation right now.

reply to post by ChaoticOrder

My idea will let the ownership remain with a few people, but the profits will be distributed more evenly. Move away from the typical success model which directs huge amounts of the profit get into the pockets of shareholders

Yes, it's the hugh amounts directed away from the source that drains the local and even some national economies. The regional resources eventually disappear.

All it requires is for the owners not to be greedy, and take a cut of the profit which represents their contributions

That would work......but

like they say ...... "IF" is the biggest word in the dictionary !


The whole problem is the "absentee" and "international" owners.

Originally posted by beezzer
reply to post by ChaoticOrder

 

Honest question.
What is stopping people from becoming shareholders now?
People can enhance their income by buying into a corporation right now.

I think you can only buy shares in a public company. But if you did you need to be sure the shares will go up. Most importantly however, you need a large amount of shares to earn anything significant. The original owners/founders usually hold the most shares, thus they have the most decision making power and the most profit. Basically what I'm saying is that we need to get the shareholders out of way and use use the extra profit to pay the employees fairly. The people who really deserve to be payed.

edit: to expand on that answer a bit more; issuing shares is a powerful tool for gaining an instant cash inflow. A "share" in a business is basically like owning a part of the business. Your amount of shares will usually dictate your amount of leverage when it comes to business decisions. The logic is, that the owners (aka shareholders) get to split up the profit based on their share in the business, simply because they own the business. It's all about maximizing profit to the shareholders. The employees are merely tools/assets used by the business to generate that income.

Originally posted by ChaoticOrder

Originally posted by beezzer
reply to post by ChaoticOrder

 

Honest question.
What is stopping people from becoming shareholders now?
People can enhance their income by buying into a corporation right now.

I think you can only buy shares in a public company. But if you did you need to be sure the shares will go up. Most importantly however, you need a large amount of shares to earn anything significant. The original owners/founders usually hold the most shares, thus they have the most decision making power and the most profit. Basically what I'm saying is that we need to get the shareholders out of way and use use the extra profit to pay the employees fairly. The people who really deserve to be payed.

Lets say I work for Widget Inc. I buy shares in Widget Inc. Wouldn't then be in my best interests to increase productivity so my shares would increase in value?

Originally posted by beezzer
reply to post by ChaoticOrder

 

Honest question.
What is stopping people from becoming shareholders now?
People can enhance their income by buying into a corporation right now.

one simple answer:

they (we) don't have enough money to buy into the power base of a big corporation.

Low-level shareholders don't have the voting power unless they own majority blocks.
And stock ownership may not produce enough income.

Plus, the stock price is not the main agenda of the heavy duty owners.

They make money from internal sources and diversified fees etc.

reply to post by beezzer

Lets say I work for Widget Inc. I buy shares in Widget Inc. Wouldn't then be in my best interests to increase productivity so my shares would increase in value?

Technically yes, but increased productivity from one employee probably wont make much difference. And as xeunchen explained, you will need a lot of money to buy a practical amount of shares. That's another reason the rich can just keep getting richer. They have the ability to invest large sums of money into things that will probably succeed and give them a high return. There is always a risk of course, but when you have the money to spare it's worth the risk.

reply to post by xuenchen


I.m not trying to influence the board. As an average guy, I just want more for my family. If I own stock, and the divdends go up, then my family benefits.

That's where my concern ends. If I can provide more, if I can provide better to and for my family, then I could care less about the pay structure.

Originally posted by ChaoticOrder
reply to post by beezzer

 

Lets say I work for Widget Inc. I buy shares in Widget Inc. Wouldn't then be in my best interests to increase productivity so my shares would increase in value?

Technically yes, but increased productivity from one employee probably wont make much difference. And as xeunchen explained, you will need a lot of money to buy a practical amount of shares. That's another reason the rich can just keep getting richer. They have the ability to invest large sums of money into things that will probably succeed and give them a high return. There is always a risk of course, but when you have the money to spare it's worth the risk.

edit on 9-10-2011 by ChaoticOrder because: (no reason given)

What if, as a corporation, I provided enough shares to encourage productivity in all my employess?

Originally posted by beezzer
reply to post by xuenchen

 

I.m not trying to influence the board. As an average guy, I just want more for my family. If I own stock, and the divdends go up, then my family benefits.

That's where my concern ends. If I can provide more, if I can provide better to and for my family, then I could care less about the pay structure.

And limited ownership CAN work in some unique situations.

But you would be dependent on the other workers and perhaps more dependent on the stock price that may not go higher even if the company is successful.

An example is the Bank of America stock price.
Their workers work. Their earnings can rise but the stock price is way down.
A worker who would have bought stock some years ago is now at a loss....that's if they still work there.

A self-regulated system might weed out the bad seeds.

A workforce that sticks together can raise the standards as long as the high managers allow it.

Many jobs today have "leveled" the pay scales and we are seeing workers with higher skill sets getting paid the same wages as workers with lower skills.

Originally posted by beezzer

reply to post by beezzer

 

What if, as a corporation, I provided enough shares to encourage productivity in all my employess?

That would be a good example of an employee owned company.

And that can work.

And actually some big corporations are doing just this.

But it's always reserved for the high up executives.