Post 6 of 20: More Free Capital for Employee Masses!

         Post 2 of this blog (We Can Shrink Wealth & Power Gaps to Near Oblivion) describes how business enterprises profit mostly thru build-up of credit worthiness.  Corporations are typically mired in debt by as much as 60% of assets for manufacturing to 90%-up for banks & merchandising companies.  Thus, a bank with P100 billion in assets may be capitalized at just P2 billion, its debts a whopping P98 billion largely in the form of deposits from employee & managerial masses.  How do banks attract such gargantuan deposits? Obviously due to the efficient work of their orchestra of skills in banking operations.  Yet who gets all the resultant profits?  Only the bank's capitalists as laws & traditions command!  

      How do we address the injustice?  Fundamentally, the main bases for credit comprise capital, collateral, capacity to pay & character or willingness to pay.  A corporation however that develops a 98:2 debt to equity ratio clearly broadcasts the efficiency of its employees in constantly repaying corporate debts thru productive & profit-making work.  Capital hardly becomes a basis for grant of loans, as its normal loan value is just 50% of capital value to compensate for lenders' risk.  In effect, capital's role in credit may be quantified as 150% of capital value.  The rest of assets being based on character or ability & willingness to pay are unsecured or clean loans that should be attributed to labor, managerial and routine.  Indeed lifeless capital being mere tools used by labor to generate profits simply cannot be responsible for existence of unsecured loans.  Quantification of capital and labor investments for a company with P100 billion in assets & debt/equity ratio at 98:2 hence becomes easy: P3bn in assets invested by capitalists, (2bn x 1.5) and P97bn contributed by labor in the form of borrowed assets.  Quantification of invested & borrowed assets respect the equality of capital & labor as contributors towards creation of profit.  Ratios of investments & borrowings quantify said contributions' roles in such creation, a process that complies with justice by virtue of merit.  Indeed, human ethic instinct resident within any person of whatever race, culture, education or creed defines justice as based on both equality & merit.  Any act that does not conform with such instincts is instantly defined by any human intellect as unjust, thus worthy of fixing.  Most of history's wars, class struggles & consequent miseries attest to the human justice instinct asserting itself.  Applied to corporations, quantification of investments conforms with the equality instinct (capital & labor as equal investors of capital & credit worthiness), & merit instinct (their roles in profit creation quantified as the ratio of invested & 'clean' asset borrowings). 

    For business enterprises, the described quantifications should hence be used as bases for just income distribution among capitalists & aggregate labor, managerial & routine.  The ratio of capital to 'clean' borrowings should be used as the same ratio that will determine how much of profits should go to capital & how much to aggregate labor.  In a 98:2 ratio, 98% of net profits should be shared by all employees, & 2% among all capitalists.  An employee who also owns shares in the company should get appropriate percentages of profits as employee & as capitalist.  A factory with 60/40 debt-equity ratio should award 60% of net profit among employees & 40% among capitalists.  A super inefficient business with zero profit is a loss for both sectors; capitalists losing capital investments & workers losing invested time, skills & efforts.  Indeed, awarding 100% of profits to capitalists who invested say a mere 10% of assets used in corporate profit-making (as what currently happens) is an injustice to any human who does not ignore or suppress his/her ethic instincts.  As what happened in past & present times, humans have resorted to force to end such injustice.  Communism sent tens of millions of humans to the grave or unspeakable tortures & suffering due to such use of force.  Unfortunately, the consequent remedy whereby the State takes the place of old capitalist roles have resulted in the State & top Party people getting the great majority of benefits & the masses relegated to 'equalized poverty.'  Additionally, absence of rewards for efficient & inventive work prolongs such 'mass equalization', with new elites wielding both hidden wealth and absolute political & social powers.

    As exercise of the imagination, free enterprise economies that use the previously described profit-sharing method may partition aggregate labor's share in profits among employees and managers based upon their individual years of schooling & work experience.  Both factors generally define quality of work. Such profit-sharing scheme based on quantification of capital & labor investments to the level of individual contributors towards profit-making should prove closest towards investment-based full satisfaction of human justice instinct.  Reason: it is based on equality (of capital as investors of cash, & of employees as investors of borrowed tools) & merit (based on a measure of individual investors' roles in profit-making).  

    However a far easier, more technologically practical & 'almost just' way is for the company to reward its employees with corporate shares, enabling them to receive profit dividends just like capitalists.  If all employees become capitalists as well, they share in profits at the same rates as 'pure capitalists.' Old company controllers (owning major shares) should not complain against such treatment, since the old value of their shares have usually been bloated by their frequent refusal to declare dividends.  Their frequent excuse is expansion of operations, which in effect deprive non-controllers (each owning much fewer shares) of their purported 'just' share in profits.  Additionally, the greatly bloated market value of old controllers' shares & their accumulated dividends have in fact been created by company employees who have developed the monstrous credit worthiness that brought in majority of production tools.  Said employees' wise use of such tools shoveled massive market values (wealth) to capitalist titles as loans get paid, with fortunes in dividend income to boot. Conclusion: the company's concert of employees actually owns majority of such massive infusions of wealth, if justice is to be served.  Unfortunately, old powerful elite owners of corporate groups plus their allies at State cannot be expected to agree to such schemes that are contrary to their suppressed or totally closed ethic instincts. What should be the remedy?   Ideally, current local & national government leaders & their millions of supporters who all wish to closely comply with their ethic instincts should conduct political action to help narrow down current stratospheric wealth gaps thru the following scheme:

         ME Infinity Formula 3: Reward for Credit & Work Efficiency (RCWE) law:  The State requires [all private corporations] to reward their employees with [free newly-created corporate shares of ordinary (voting) nature] worth the equivalent of [one month's salary for every year of service].  Similarly, [all State corporations, agencies & instrumentalities], as well as [private non-stock non-profit organizations] have to reward their employees with [free capital shares in mega co-ops] worth the equivalent of [one month's salary for every year of service].   The latter reward acknowledges non-profit employees' roles in facilitating general business, economic, social & political systems that help create peace & wealth for the society.  Rewarding them with MC capital shares enables them to earn dividends & stock price rises although their companies do not issue capital stocks and profit dividends. 

    What monumental social effects will such justice-based RCWE law create for a Phil. society with its few score billionaires amid 40 million or so middle class masses (mostly $300-$500 monthly income earners) & 80+ million poor described as 'just getting by' to starvation levels?   Here are the majors: (a) wealth &  power gaps between elites & masses will greatly diminish on fast-track basis; (b) all companies' employee efficiency rates will rise to the roof as employees enjoy proportionate risen income for good work, their managers becoming millionaires as models; (c) constantly rising national productivity as employees work to max efficiency (for max income) will bring down prices of all consumer products due to widened product choices; (d) strikes, labor unrest, pilferage, & corrupt practices will be prevented as employees consider such practices as preventives against their personal dividend incomes; (e) employee voting shares will prevent elite corporate controllers' tendency to retain profits for 'expansion purposes', a practice that exacerbates wealth gaps; (f) thru employees' voting shares, corporations' trillions in savings will tend to get invested in green mega co-op joint ventures instead of getting pooled as usual in stock markets where 'gambling' with investment funds is the norm; (g) gov't employees owning shares in mega co-ops will tend to view all businesses as personal & mass income sources instead of treating them as milking cows thru 'parking' of permit applications to get 'oiling offers' as in old times.  Bureaucratic corruption thus dwindles to near-zero levels; (h) All private companies will diligently repay their borrowings upon due date as employees equate good repayment records with rising credit worthiness that bring in more borrowed assets, which means risen personal dividend rewards  (i) employees will develop an inventions culture as improvements they suggest that help raise corporate productivity and profits translate to higher profit dividends for themselves & all involved; (j) all employees will become models in terms of work efficiency, helpfulness & patience to customers, teamwork, initiative, loyalty & other positive aspects, as such virtues relate directly with their dividend & stock value incomes; (k) all employees will avoid old negativities such as turf wars, pilferage of consumables, cheating of work & rest hours, workplace intrigues, bullying, battle of egos, dictatorial management style, etc., all of which negatively affect their dividend incomes.  (l) State incomes from taxes & other impositions will rise multiple times in endless manner, since the multiplication of business startups, huge rises in private companies' sales & profit rates (due to enhanced employee motivation) greatly expand the tax base. (m) all employees motivated by dividend & capital title rewards as described will greatly enhance business expansion & creation society-wide, in the process endlessly creating millions of jobs for bottom poor. (n) elite capitalists should find no reason to counter the described democratic systems since employee-capitalists' profit-driven efficiency will expand elite rewards (dividends, stock value rises) as well.  Local banks, malls & big industries will tend to expand operations worldwide due to their employees' desire to earn world-class dividends thru creative work; (o) as the masses of routine employees learn how big businesses operate thru their participation as voter-capitalists, they will tend to set up new businesses that will further expand the economy, which will create more jobs for bottom poor.

    Read next post: How MCs may acquire 'bulk' capital and top management, engineering, technical and marketing skills without paying for them! (For Android cellphones, swipe screen up & down, tap arrow at left of title, and tap Post 7: Convert Half of Value Added Tax Proceeds to Mega Co-op Shares)

    For Question & Answer procedure, tap Post 19: Time to Act! Help Promote Our Mega Co-op Movement!  For comments: email fermin4megacoops@gmail.com