A pioneering new management strategy

[Tatar Khan]

"The more money CEO is payed the higher is the incentive not to screw up"

And the bigger buffer they have when they do get fired. Also, their jobs tend to be less precarious, and dropping down a notch doesn't mean any serious . Plus you're practically assuming that their superiors are omniscient and benevolent gods who always know when it's the CEO who's not earning them enough money, and will see through any fudges. Whereas on the factory floor, heads roll not due to poor individual performance, but due to market pressures. Or because some guy at the top messed up.

Well here how it often goes for CEOs. Shit goes through the roof (stock falls) board of directors come and breath down the neck of CEO to get the stuff fixed. CEO goes and fixes the stuff, maybe or  maybe not. Shit goes through the roof again and board of directors (who do get huge reports from corporations, usually themselves are executives in other firms or experts in certain fields such as different markets or financial spheres. They know wen it is CEO screwed up or at least they think he did because they told him to get things fixed and he did not. Result he gets fired and walked out of the building by the security guards that won't let him even touch things on his desk, talk to other people, or even get his car.

Yes when market conditions are bad it is floor workers who get kicked but lets see do you as a company want to fire people with phds and executive master degrees or high school drop outs. The upper layers of executive would be scooped up by other firms with half the reason being corporate espionage and than you will never see them again, while for lowly job any other high school drop out will do.

"Well I pay the government taxes to do their job thus they are on my payroll sort of. But I don't pay the company for giving me a job, they pay me."

Well, no, you're paying them in labour, which has a certain financial value. In fact, they normally get more out of you than you get out of them (pretty much by definition of capitalism).

Actually workers supposed to get paid their marginal product, in other words how much more to the production of the factory they add with their presence, due to hardness of measurement of that workers get paid the average product, which is in no way inferior.

You believe that profits must be paid to the workers and that is wrong because profits are payment to the owner/owners for their work. And what work they do well lets say I want to open an ice cream shop. First I run around like crazy doing research and looking for a franchise and try to prove myself to franchise company that I won't screw up and put bad mark on them. Than I ran around looking for location and making sure it suits the franchise company, than I buy all the equipment and lease the building, for that I take the loan out often bank, to give bank security that I will pay back I mortgage over my house for them. I set everything up and than gets some high school students to scoop. Oh man  how stupid of me it is to consider profits as mine no I should give it to these high school kids that just came by with a resume.

[nemafakei]

"The point is, it's cheaper for them to have those workers they've deemed incompetent (that is, they perform below the norm and have to be replaced by new ones for actual teaching duties) do nothing and hope they leave, then fire them for their incompetence."

Well, if they can find evidence of incompetence and fire them for that. To be honest, I'm less concerned about the possibility of having a few extra useless teachers stuck doing paperwork (and remember: we're still accepting the employer's assertion here) than the possibility of having good teachers fired out of spite.

" Prove that management costs are comparable (or larger) in size with other salary costs in such corporation, an assertion wich you have avoided to back up thus far."

I don't have the data at my fingertips. But if you can find the data to prove the reverse, go ahead!

"Since corporate enteties will strive to minimize especially the biggest costs, this seems counter-intuitive."

Not if you consider how these corporate entities are run. Who are the people who do the cost-cutting, and who are the people with the purse strings? Management.

"I can't chose not to be affected by what my government decides except by emigrating, wich is hardly fair- and not allowed by regimes that are "not so nice"."

Well, quitting isn't always a choice either, if your employer has a local monopoly on what you're trained to do or if there are few other vacancies. Migration is no different, except that it's a bigger move. (And indeed moving is sometimes necessary to find a job).

"a company is not public but private property."

Circular reasoning here. I'm arguing (among other things) that the fact that companies are private property is wrong, you're saying it's not because... they are private property.

"The amount of labour is of equal value to the wage paid as the latter is a result of a supply-demand equilibrum."

Not for any non-trivial definition of value.

-----

"They know wen it is CEO screwed up or at least they think he did because they told him to get things fixed and he did not."

Sure, but a 'good' CEO doesn't let news get out when things go awry, stock doesn't fall. When a problem does happen, CEOs make sure to produce lots of information on how they will fix it and how it has been fixed. The CEOs who survive aren't always the ones who're good at making a company work, they're also the ones who're good at making the company seem like it is.

"lets see do you as a company want to fire people with phds and executive master degrees or high school drop outs. The upper layers of executive would be scooped up by other firms with half the reason being corporate espionage and than you will never see them again, while for lowly job any other high school drop out will do."

Precisely my point. Anathema, are you looking?

"Actually workers supposed to get paid their marginal product"

According to whom? If workers were paid their full marginal product, profits would be zero. (Nitpicking there...)

"Oh man  how stupid of me it is to consider profits as mine no I should give it to these high school kids that just came by with a resume."

Well, quite. But I don't support a capitalist mode of production, so that's not a problem - major public decisions like investment should not come from a few rich people, but should be a collective community decision.

[Anathema]

I don't have the data at my fingertips. But if you can find the data to prove the reverse, go ahead!

I'd say that since you're the one who's claiming something (wich goes against common sense, I might add) it's not up to me to prove you're not wrong. If I stumble on something interesting I'll share it with you, though.

"Since corporate enteties will strive to minimize especially the biggest costs, this seems counter-intuitive."

Not if you consider how these corporate entities are run. Who are the people who do the cost-cutting, and who are the people with the purse strings? Management.

If the executive is found by the shareholders to have done to little to cut costs, he/they can be shown the door.

As I have hinted at before, cutting costs on educated personel can be more tricky because they provide a service that isn't as dispensible and as easily replaced as blue collar workers.

Well, quitting isn't always a choice either, if your employer has a local monopoly on what you're trained to do or if there are few other vacancies. Migration is no different, except that it's a bigger move. (And indeed moving is sometimes necessary to find a job).

I'm sure most people would move only after they found a job, but I digress. As far as monopolies are concerned, we don't live in an economy of perfect competition, but antitrust legislation can bring you a long way (and indeed is doing so in the EU)

Besides quitting a job, there's another way to avoid bad working conditions: not sign up for a crappy contract in the first place. Given the fact that in most capitalist countries unemployment hovers between 3 to 10 % you don't need to be unemployed forever if you don't want to, and since we have social security it's not as if you starve to death in the meantime ::)

Circular reasoning here. I'm arguing (among other things) that the fact that companies are private property is wrong, you're saying it's not because... they are private property.

It's not circular reasoning: I have answered your question wether it would be a good idea to let employees decide the course of a company - the company is not theirs, allowing them to dictate over what happens with it effectively makes private property a farce. You could have asked wether it's a good idea to abolish private property instead, but you did not.

"The amount of labour is of equal value to the wage paid as the latter is a result of a supply-demand equilibrum."

Not for any non-trivial definition of value.

You may not have noticed, but you too are living in a market economy where the value of a good or service is determined by its scarcity and want for it. It's hardly a trivial definition. Not that I've seen you put one forward.

"lets see do you as a company want to fire people with phds and executive master degrees or high school drop outs. The upper layers of executive would be scooped up by other firms with half the reason being corporate espionage and than you will never see them again, while for lowly job any other high school drop out will do."

Precisely my point. Anathema, are you looking?

Dealt with above. Your condescensing tone is duly noted.

[Tatar Khan]

"I can't chose not to be affected by what my government decides except by emigrating, wich is hardly fair- and not allowed by regimes that are "not so nice"."

Well, quitting isn't always a choice either, if your employer has a local monopoly on what you're trained to do or if there are few other vacancies. Migration is no different, except that it's a bigger move. (And indeed moving is sometimes necessary to find a job).

I must ask an example of monopoly on training. When there are few vacancies available that ussually means that maybe you should get retrained.

Sure, but a 'good' CEO doesn't let news get out when things go awry, stock doesn't fall. When a problem does happen, CEOs make sure to produce lots of information on how they will fix it and how it has been fixed. The CEOs who survive aren't always the ones who're good at making a company work, they're also the ones who're good at making the company seem like it is.

As i said board of directors are not idiots and they are made up from people who are suppliers, buyers and market experts, CEO won't be able to hide their mistakes from them because they would show up somewhere. CEO that will hide successfully like Enron style go to jail.

"Actually workers supposed to get paid their marginal product"

According to whom? If workers were paid their full marginal product, profits would be zero. (Nitpicking there...)

Ok this is a standard simple production equation. Q = (L^a)(K^b). Marginal product of L is a(L^(a-1))(K^b). Marginal product of capital is b(K^(b-1))(L^a). Now lets put some numbers for a and b a = 1/2 b = 1/3. Than marginal product equations are MPL = (1/2)(L^(-1/2)K^(1/3) and MPK = (1/3)(K^(-2/3)L^(1/2). So now lets add numbers for L and K. Originally there are L = 20 and K = 10. Q = 9.635 units. Now P = Marginal Cost (MC). Cost = ACxL+ACxK+OP. AC is average cost, OP is opportunity cost, cost of doing what you doing instead of doing something else (your second best option). So if you working as a manager of a franchise but have education in finance what is the benefit that you given up by working as manager of franchise than an employee in financial position of a firm. Why average cost well if we do MCL = MPL and MCK = MPK than MPL = 0.2409, MPK = 0.3212. However this is would be the salary of 20th unit of labour and 10th unit of capital. What happens if we see what would have been the payment for first unit of labour given K = 10, than MPL = 1.0772. This does not look fair just because when owner was hiring the guy was first in interview process doesn't mean that he should get more than 2Oth guy. Overall they will process very close qualifications. So average product is rather used . APL = 0.6591 and APK = 0.9060. And lets OP = 5 So C = 0.6591*20 + 0.9060*10 + 5 = 27.242. Cost per unit = 2.8274. So this is your P if you have no market power. If you can't sell at that price that means you doing something wrong, usually that means you should go to your second best option. So economic profit always is 0 when there is no market power. But since opportunity cost is economic cost it never shows up on accounting books than this is the profit. Now since this was ideal world and there is market power that firms often posses and that usually is incentive for other firms to come in and take advantage of economic profit, thus as more firms enter the market such profit is removed and the market moves towards perfect competition. So than P = ACQ + EP/Q, where ACQ is cost per unit and EP is economic profit. If this economic profit is given to the workers than ACQnew = ACold plus EP/Q. Now there is no incentive to move in the market because than once again the EP = 0 for the company and so the price that was high due to market power stays high.

"Oh man  how stupid of me it is to consider profits as mine no I should give it to these high school kids that just came by with a resume."

Well, quite. But I don't support a capitalist mode of production, so that's not a problem - major public decisions like investment should not come from a few rich people, but should be a collective community decision.

Most people do not possess the education to properly understand financial investments or have economic and financial education so than trusting them to invest without loosing would be a very high risk. Most people also do not like risk so the community as a whole will most likely decide to not invest and just keep their money with them.

[nemafakei]

...

Ok.

Let's go back and look at what began all this.

I wrote: "The problem is that unions are permanently on the back foot, by their very nature as workers' organisations within capitalism. They're stuck with fighting for compensation and defending what rights they do get."

You asked me to elaborate. That's what I've been doing. My point was always that unions are stuffed because they're generally set up as (if you'll excuse the jargon for abbreviation purposes) reformist organisations at the point of exploitation within a capitalist economy, rather than just running the economy from the ground up to begin with (where they'd become obsolete). Your point that we live in a capitalist economy does not at all discredit what I'm saying. If you're saying that it's some kind of moral imperative that we should, then that's something different entirely, and please say so, to make things clear.

I further pointed out that: "They get a lot of stick when they take a stand, whereas most 'pioneering management strategies' when questioned are dismissed as necessary or justified as natural."

Well, as I've already said, Colonel_here has proved my point, and you've been doing much the same.

(By the way, I'm not intending to sound condescending, e.g. I mean "trivial" in the more technical sense and I'm assuming you're taking it hat way, not as a pejorative - and by the way, non-trivial measure would be a more objective one such as defining it in terms of a natural-resource-based currency, or a labour-based account, rather than one based on the result of negotiation, which, while an interesting economic observation, has no a priori reason that I can see for building the sort a moral argument round it that you are presumably doing if you want to make it more than another bit of circular reasoning).

Colonel_here, I'll reply later as it's too late for me, now.

[nemafakei]

"I must ask an example of monopoly on training."

Car manufacturers in areas where only one employer is operating.

"When there are few vacancies available that ussually means that maybe you should get retrained."

Which is far easier for people with more capital. For most people, retraining is expensive and, simply put not always possible (especially when jobs require previous experience!)

Looking at your equations, you've not defined most of the terms, so I can't really respond.

"Most people do not possess the education to properly understand financial investments or have economic and financial education so than trusting them to invest without loosing would be a very high risk. Most people also do not like risk so the community as a whole will most likely decide to not invest and just keep their money with them."

Sure, but again, that's the way *our* society works. In a society (or even a company) where people are used to being involved in such decisions, they'll be more proficient. And those still less sure of themselves can always abstain.

[Tatar Khan]

"I must ask an example of monopoly on training."

Car manufacturers in areas where only one employer is operating.

But the skills ussually are transferable and can be applied somewhere else.

"When there are few vacancies available that ussually means that maybe you should get retrained."

Which is far easier for people with more capital. For most people, retraining is expensive and, simply put not always possible (especially when jobs require previous experience!)

There are large government programs created to help people to retrain themselves. I also know what you mean by the previous experience. I live in a such a contry that is oppsessed with experience, yet people still finds jobs.

Looking at your equations, you've not defined most of the terms, so I can't really respond.

Q = quantity of units produced

C = cost

TC = total cost

L = labour units

K = capital units

MPL = marginal product of labour

MPK = marginal product of capital

APK = average product of capital

APL = average product of labour

EP = economic profit

OP = opportunity cost

P = price

MCK = marginal cost of capital

MCL = marginal cost of labour

ACQ = average cost per unit of product

Sure, but again, that's the way *our* society works. In a society (or even a company) where people are used to being involved in such decisions, they'll be more proficient. And those still less sure of themselves can always abstain.

Most people are very opinionated and think they know how to spend and invest their money.

[SpiceGuid]

Isn't that old news?

I think it's a case of Goodyear / Goldsmith economy (restructure the company according the investors).