Corporations seem to be very poorly understood by many people. This page is an attempt to capture some initial Observations or Opinions that may crystallize into Positions representing some of the views held by this community’s participants. This relatively cautious approach is intended to allow community participants to state their own diverse opinions as input to any resulting discussions.
A simplified summary of a Company’s ‘accounting’ perspective …
In considering various aspects of CorporateGoals, it may be hepful to consider that Corporations can be every bit as diverse and different from each other, as can Individuals. The following cases may yield insights. …
Part of the reason that I/we are uncomfortable with Corporations, is because they seem like gigantic entities that control our lives, which we can never create, which we can never actually be part of: Only serve, like living batteries, seen in the matrix.
Further, we have few opportunities to talk about them, strengthening the disconnect.
Since I have completly reversed my stance on this subject since ceasing to be an “employee” and becomming an “employer” ( I really, really like the German terms for these concepts which literally translate to “workTaker & workGiver!); I’ll focus my thoughts by stating one of the dramatic reversals.
I personally view the taxation of corporations the same as I view the taxation of individuals: You’re paying dues for being part of the club. And, the government does not consume money either- it’s not like they throw it into a furnace. (Well, okay, they do, but they just mint more elsewhere. )
As for good governance: I don’t think it’s so much “The way they make decisions,” so much as it is: who gets to participate in that decision making, and what their motives are. There’s at least some aspect of public control in the government. Almost none, in the corporations, which work very hard to insulate themselves from government. (It seems very dangerous, to me!) As an outsider, the difference in control seems minimal: they are both “vastly inaccessible.” But, that’s why I believe in things like a DemocracyOfGroups.
But I feel like we’re diverging from: “Corporations…poorly understood by many people.” I’m really interested in what you think about Corporations as Corporations; Not so much: “Should they be taxed or not?” I suspect that if I had your view of Corporations, of your model of the situation, then that would be a deeper insight.
The preceding short paragraph “As for good governance…” presents me with considerable challenges, in that it appears to me to make several strong assertions in a very small block of text, making the information content extremely dense. Let me start with the wording of just the first sentence. The statement …
… causes me some confusion since I think that “The way they make decisons” is in may ways equivalent to “who gets to participate in that decision making, and what their motives are.”
That being said, I think we should explore some of the implications of this statement further. Specifically, for example …
Feel free to add Opinions to this section of the page.
As various Opinions are colleced, we should be able to cluster them into related Perspectives or Scenarios that it may be possible to compare and contrast.
I think the problems that Lion associated with the Corporation are really about really Big corporations, and the StateCapitalism? that they co-evolve with.
I disagree, and point to the TragedyOfTheCommons paper.
“Mutual Coercion Mutually Agreed Upon” is the basis of most society, and this includes taxation.
Hans, in the equation:
Would you say Wages are a Revenue or an Expense?
From the perspective of a Company (this CorporateGoals page’s) …
“Generally Accepted Accounting Principles” (and probably all company Financial Statements, at least in the western world that I am familiar with) class Wages as an Expense. In general, the monies that a Company receives in exchange for the Goods and Services it provides, are Reveneues, while all of the Costs it pays to produce those Goods and Services are classed as Expenses. Obviously, the “left over” is the Income (also called Profit or Loss depending on whether its a +ve or a -ve amount).
From the perspective of a Wage earner, I suppose Wages are a Revenue item, although most Tax authorites strive to treat them as Income, ignoring some relatively obvious employment expenses such as; transportation costs to & from work, business attire costs, …
I wonder what the result of this discussion will be. If the fundamental corporate goal were the mimizations of wages, then corporations would close down and no coporations would be founded.
All organisations change all the time according to actual goals. They spend money (and increase wages) when they go for new goals. If they feel they have to cut down expenses (e. g. increase profits) they will look at wages and expenses for reductions, and to new products or services for increasing returns. Changes to the corporate structure are also connected to returns and expenses, short-term and long-term. It is a complex optimisation problem that can’t be reduced to a single parameter.
Understanding corporation means to understand that often corporations follow silly strategies and that most of the time there is no corporate mind that has a complete overview. Instead various parts within a corporation (dpeartments or single persons) may follow their own interests to the disadvantage of the whole.
One of Henry Ford’s most important innovations as a ‘industrialist’ was to “pay the highest wages possible”. Most of the companies that view their emplyees as an assset strive to do this, as do all ‘employee owned’ companies.
Hmm… Maybe Wages are a special kind of Expense?
When (or which) other Expenses would Corporations not strive to minimize?
When I say ‘minimize’ I don’t mean “set to zero”, but “strive for the lowest within constraints” - though discovering what constrains is not trivial.
Physical laws constrain humans to needs of Water, Food/Drug, Cloth, Shelter, Soap.
Owner profit increases as worker choice to fill needs decreases, because wages may then be lowered until alternate avenues are “worth it” for the worker.
This is why Land and Capital hoarding are standard practice of WhatIsEconomy.
No. The corporate goal is to maximize Income. People who invest a little money in a company now, hope that they will get lots of money in return, sometime in the future. They don’t generally ask too many questions about where that money comes from.
At first glance, since
, it may seem that reducing Expenses (such as wages) will increase Income.
Occasionally you read newspaper stories where exactly this happens – hundreds of people are laid off, “saving” the company tons of money.
However, most CEOs are smart enough to see the indirect results of reducing wages. Imagine that all wages in one company were reduced to one penny per week per person, “saving” the company tons of money. Practically every employee would immediately resign. Then, because there is no one to talk to customers, take orders, deliver orders, etc., the Revenues of that company would also immediately plummet. The result is that Income would quickly drop to zero. So that is not a Income-maximizing strategy.
As you may have noticed, often companies hire more people, resulting in higher expenses (not only direct Wages, but also other expenses such as office space to put a roof over their heads, all the equipment they need to be productive, training costs, etc). Companies do that in hopes that it will (indirectly) result in Revenues that increase even more than expenses were increased, which results in more Income – which is their goal.
The CEO will do whatever she thinks will increase Income. In some cases, this requires increasing wages. In other cases, this requires decreasing wages.
From a purely financial point of view, hiring a worker, hoping that worker will bring in more revenue than he costs in salary, is the same as renting some machinery, hoping that people will pay more to buy the product that machinery stamps out, than the cost of the rent on the machine.
|maximize Income||maximize Wages||????????|
Of course, there are other things that are more important than increasing some integer in a bank account somewhere. It is unfortunate that many of those things are intangible, making it all too easy to forget how important they are. It is too easy to neglect to consider how those things will be effected by the decisions we make. It is difficult to even measure how they have been effected by the decisions we already made.
Should I mention some of those “more important than money” things here?
I would be interested in at least seeing a bit of a list.
I like your additional thoughts.
If there are no objections, sometime after 2006-Oct-01 this page will move to some other wiki. If no one has a strong preference, I will flip my 3-sided coin and randomly pick Millennium Development Goals Wiki or ETerra or Clondyke – is there a better place for it?
I recently started reading a paper on the economics of free software development and it started by explaining what kind of community efforts are best solved by firms and what kind of community efforts are best solved by markets. It was an interesting topic and didn’t seem off-topic to me, for a fuzzy definition of topic. I don’t think this page has to go, unless there’s a place where it would be more appropriate – as envisioned in HubAndSpokeWikis.
I have no objections to this page being moved, but I feel that I should state that the material I posted to it, was intended for a few of the members of this particular community. I’m not at all sure how it may (or may not) apply to others if it is moved, and effectively becomes “out-of-context”.
A few points from the past…