It's Time to Allow Employees to Participate More Fully in Stock Ownership

The disconnect between Wall Street and what we now call the “woke” culture is startling. During the week ended June 5, the stock market rose 1,985 points or about 20% on the Dow, the highest increase in value for some time. During the same week, we saw COVID-19 deaths exceed the 110,000 level and the murder of George Floyd in Minneapolis, MN. How can it be that two awful events occur in the same week raising doubts about a perceived awareness by many in the public of issues that divide us concerning social justice, racial justice and the criminal justice system and increases in wealth of the “one-percenters”?

It is said that the stock market is a leading indicator of things to come, which implies the economy will build on last week’s gains: jobs will increase; unemployment will decrease; profit and loss for businesses will increase; and most Americans will feel more confident about where we are headed. However, it does nothing to reform social justice; better train the police to deal with protesters who might “get in their faces;” and open the hearts and minds of all Americans to the fact that we still have a long way to go in race relations in the U.S.

The fact is our country is divided on many levels and the protests have made it clear: Democrats vs. Republicans; the Haves and the Have Nots; and the treatment of whites versus minorities. How can we, as a nation, overcome the divide? One step is to look for productive ways to close the gap between those who have made it to the top of their company’s elite, in some cases benefiting from white privilege, and those who haven’t been able to do so yet they contribute significantly to the system that has created the wealth gap in favor of the one-percenters. I'm not talking about socialism. I am suggesting we need to transition our economic system from the pursuit of self-interest that is the basis of traditional capitalism to a more community-based system based on the concept of "compassionate capitalism". Compassionate capitalism measures a company's costs imposed on the environment, being accountable to consumers and stakeholders; and treating employees with kindness and respect.

Perhaps it is time to look at the European Union model of employee stock ownership that provides an outlet for employees to buy stock in their companies at a discount or through stock option plans that are generally restricted to members of top management. An employee stock purchase plan has many benefits and can close the perceived gap between the Haves and Have Nots. The Employee Share Ownership policy in the European Community offers the following benefits:

1. A wider distribution of corporate wealth encourages greater involvement of employed persons in the progress of their companies.
2. Employee financial participation enhances productivity, competitiveness and profitability of enterprises.
3. Financial participation is an important instrument for recruiting and retaining staff, enhancing the motivation of employees.
4. Financial participation enhances loyalty and long-term commitment and improves profitability.
5. Financial participation increases job satisfaction of workers and enhances the quality of work.
6. A more equitable distribution of wealth and income fosters a commitment to common goals and a better sense of community, each strengthening the ethical notion that we are all in it together.

Employees should also have a greater say in the management of organizations. The European model of “worker representation” on corporate boards of directors refers to the right of workers to vote for representatives on a board of directors. In 2018, a majority of countries in the European Union had some form of law guaranteeing the right of workers to vote for board representation. Together with a right to elect work councils, this is often called "codetermination".

We need to change the model in the U.S. from pure capitalism, with its emphasis on maximizing the wealth of top managers, to one where the distribution of wealth is more equal. There is no way to justify the fact that CEOs in the U.S. have seen their executive compensation grow by 1,000% in the last 40 years, and they now make 278 times the average worker. Compare it to the CEO/average worker pay in the United Kingdom (94:1), France (91:1) and Germany (89:1).

The U.S. was built on equal opportunity for all. Unfortunately, our history is full of examples of discrimination against various groups that have affected the workplace and economic well-being of women, minorities and other self-identified groups. Gender inequality and the inability of corporate America to develop minority worker skills and provide economic opportunities are two such examples that ultimately lead to disparities between the Haves and Have Nots.

The bottom line is the best way to improve society for all and tamp down the anger in the country is to follow the path of compassionate capitalism that is built on empathy and equality. For employees to bridge the wealth gap, they should be given an opportunity to buy stock in their company at a discount and share in its riches through stock options, just as have those in top management positions.  The European model is a good place to start to bridge the divide between the Haves and Have Nots.

Posted by Steven Mintz, aka Ethics Sage, on June 8, 2020. You can sign up for our newsletter and learn more about Dr. Mintz’s activities at: https://www.stevenmintzethics.com/. Follow him on Facebook at: https://www.facebook.com/StevenMintzEthics.