The argument against legislation giving workers control over corporations
First off let’s make sure we agree on two things, property rights exists, and if you pay someone for a good or service, you are entitled to the benefits of the good or service since, after all, you paid them for the good and they agreed to sell you the good or preform the service for a set price.
So senators such as Bernie Sanders and Elizabeth Warren have both in the past made their positions clear on that they support bills that would mandate that corporate boards be composed of some amount of employees, such as Warren’s plan that would lead to corporate boards having to be at least 40% employees or Sanders’s plan that would require corporations to set aside some amount of stocks into a trust fund with dividends that went out to employees.
I am now going to explain why both ideas are horrible and illogical.
So there is a man named Jack. Jack wants to start a business, so he buys some land with an apple tree on it. He then picks his apples and sells them to customers. One day after saving up enough money, he buys a second plot of land with more apple trees. But Jack can’t be in two places at once so he hires Tom to pick apples on the second plot of land for him.
Now remember Tom was hired to preform a service, the service of picking Jack’s apples, now senator Sanders or Warren might say that Tom is entitled to those apples because he picked them and man is entitled to the fruits of his labor both figuratively and literally in this context.
While that is true that man is entitled to the fruits of their labor, we must remember that those apples originally belonged to Jack and Jack alone. So even if Tom put his labor into picking them they still belong to Jack, and to say otherwise would mean to try and justify theft. What Jack is paying Tom to do is to preform a service on his trees such as picking the apples off of them and in exchange he is offering him compensation. And that compensation is the fruit of Tom’s labor.
Now this same principle can be applied to any more workers that Jack hires, such as paying a construction worker to build a store for his apples on land Jack owns, or Jack hiring someone to work at the store to sell apples for him such as a cashier.
Now Sanders’s bill would call for those workers such as Tom to be entitled to some of the corporate profits.
But remember Jack paid Tom to pick the apples a wage they both agreed on, Tom gets paid the set amount regardless of how profitable the day is, Jack however only gets paid by the profits of his apple store, and if his sales drop he is the one who loses money.
So it’s unfair to say that Tom would be entitled to the profits of the company without having to take the same risks as Jack. Now remember Tom could always agree to buy some portion of the stock from Jack, if Jack is willing to sell it, and then reap the profits of the business, just like Jack while also taking on a risk equally proportional to Jack.
So let’s expand this idea further, 10 years down the line Jack’s Apple company has expanded to sell all fruits and is highly profitable. However Jack decides to retire so he sells all of his shares to 5 men, each man gets 20% of the company for an amount Jack and them agreed upon.
Now one of these men is Tom, Tom just like the rest of them used their own money to buy a 20% stake in the company. So they each also hold a 20% risk if the company goes under, and they would be liable, and so for that risk they are each entitled to 20% of the profits. Nothing about this is unfair.
And then one day a socialist walks through the door of the corporate headquarters and says to the board that what they are doing is unfair and that the workers are entitled to the profits. Tom then tells the socialist that the workers don’t own any stakes in the company and that if they want the profits they have to buy stock in the company like they did.
Now let’s be aware, out of the 5 board members present 2 of them were hired by 2 shareholders to represent them and run the company on their behalf.
The socialist then proceeds to scream at the board saying how the company is exploiting their workers.
Tom then says to the socialist, “exploiting? All of our workers agreed to work for us for a set wage, we didn’t force them to, if they don’t like it they can quit and find a job that they believe compensated them more fairly.”
The socialist responds “Yes you are exploiting them! For every dollar your employees make for you they only get 10 cents!”
Tom looks at him and says “And so what? Most of that 90 cents goes to cover the expenses that it cost sell that fruit, such as paying for fertilizer, and irrigation for our fruit farms, and with everything else at the end of the day we only get 15 cents for every dollar those employees make for us. But you also forget if our customers stop buying fruit for a day, those employees still get their pay but we don’t get ours! And besides even if we doubled our prices for our fruit and paid our workers the same, and let’s assume customers still buy the same amount as usual, the workers would still be doing the same work as they always did but now they would be making us an additional dollar while still doing the same work as before. If we were to lower our prices so that for every 10 cents they get we only got 5 you would probably wouldn’t say it’s exploration, yet they would still be doing the same amount of work for the same pay as before, so comparing the amount of money the share holder and worker make is a pointless argument!”
The socialist then goes out and lies to the American people, saying how corporations are exploiting their workers and that if they vote for him he’ll help them. In reality he’s lying to the American people so they’ll vote for him because he knows that being elected as a senator will get him a nice fat paycheck.
Article from /r/Libertarian: For a Free Society