Democratic Business Creates Free Markets

The Free Market philosophy assumes that a person makes as much money as s/he is worth. In real life, this is not true. The average Fortune 500 CEO makes 488 times more than his/her average employee. No one's work can possibly be worth 488 times more than another's. Beyond the Fortune 500, it is common practice for entrepreneurs to make a small, initial investment, build the business on the backs of others, and then receive a disproportionate amount of the rewards.

However, we cannot blame Free Markets for our economic disparity. We can no more blame Free Markets for unfair compensations than we can blame corruption on democracy. We can only blame economic disparity on human greed and business structures that encourage greed.  Just as corruption thrives when democracy is ignored, greed thrives in businesses that are run like a dictatorship. The inevitable end of corporate dictatorship will create an environment in Free Markets where people make as much money as they are worth.

Democratic businesses compensate people for what they are worth. The average democratic business pays less than 20 times more, than its average employees, to its highest paid employee. Moreover, democratic businesses compensates employees with ownership for their investment of time and effort. In sum, democratic businesses empower employees to resolve their own disputes between labor and management, and therefore, obviate the need for most government intervention and regulation.

The Most Democratic Workplaces of 2010

WorldBlu is a non-profit organization with the goal to inspire the formation of 20,000 democratic organizations by the year 2020. Each year WorldBlu recognizes, on it's website, the most democratic organizations in the world. Check out this year's achievers!

Democracy is More Cumbersome than Dictatorship

Semco went through a radical, democratic transformation beginning in 1980. In 1980, Semco employees "each produced an average of $10,800 worth of goods a year." When Ricardo Semler wrote Maverick in 1993, his employees each produced an average of "$92,000 worth of goods a year (adjusted for inflation)--four times the national average; by the value-added standard, productivity rose six and a half times."

If democratic businesses are more profitable and motivating, then why do people insist on creating oligarchical/command-control organizations? Because...
(1) "so often it is power and greed and plain stubbornness that make bigger automatically seem better."
(2) "secrecy is a strong incentive to be conspicuously greedy."
(3) "bureaucracies are built by and for people who busy themselves proving they are necessary, especially when they are not."

"The era of using people as production tools is coming to an end. Participation is infinitely more complex to practice than conventional corporate unilateralsm, just as democracy is much more cumbersome than dictatorship."

(Quotes taken from Maverick by Ricardo Semler)

Democratic Healthcare! Why didn't I Think of That?

"Senator Max Baucus of Montana, the chairman of the Finance Committee, who is leading an effort to draft a healthcare bill, said Thursday the public plan would take the form of an insurance cooperative that would be owned and operated for the benefit of its members, but not run by the government. The Senate finance panel plans to take up the legislation on June 23rd."

President Obama's "uniquely American" version of public healthcare maintains the motivating pressures of the free market, while eliminating the choking costs of high paid executives and excessive profit margins. If this insurance cooperative is set up as a true cooperative and not as another arm of government, we may witness the greatest victory of the Democratic Business Revolution to date.

Next, we need to democratize Amtrak. What would it be like if the people who work for and ride Amtrak were to own and manage Amtrak?

(Quoted from DemocracyNow! 6/12/09)

Argentina: Capitol of Worker-Run Businesses

More than 75,000 people work in worker-run businesses in Argentina, and that number increases every year.

A Business that is Run Like a City

"Most of the forces that shape the structure of business, including capital markets, business schools, economic theory, a variety of laws, and even our own upbringing trains us to assume that at work you're either an employee or a boss, but never a citizen. So at Equal Exchange we understand why workplace democracy seems such a novel concept. We simply don't accept it." --Equal Exchange President Rob Everts

Equal Exchange is a 23 year-old, $34 million employee-owned firm that is run like a small city where employees act as citizens and the employee-elected Board acts like a City Council.

Voters Champion Free Market But Want More Regulation

The American people intuitively know that there is something wrong with American capitalism, but they can't quite put their finger on it.

Rasmussen Reports released a seemingly contradictory report on December 29, 2008--just after the economic crisis began. It seems that 70% of voters believe that a free market is better than one managed by the government; yet, 52% of voters believe that there is a need for more government regulation of big business. However, 65% agree that government and big business often work together in ways that hurt consumers and investors.

Intuition has brought the American people this far, but what are the facts. Nationalization is not democratic because government control is simply a new layer of management on top of the excessive, burdensome layers that already exist.

The way to maintain free markets and regulate corporations at the same time is to truly democratize corporations. Corporations that practice financial transparency, have few layers of management, and offer stock-ownership to all employees are held accountable by the employees themselves and have very little need for government oversight.

(Statistics taken from http://www.rasmussenreports.com/public_content/business/general_business/voters_champion_free_market_but_want_more_regulation)

90 Million People Will Die as the Result of an Economic Collapse

The world is on the edge of a economic collapse because of the lack of integrity of a few in our businesses. "A new report from the Overseas Development Institute said the collapse of the global economy would cost 90 million lives, lead to an increase to nearly a billion in the number of people going hungry, and cost developing countries $750 billion in lost growth."

In a world where corporations are given the power to determine the fate of billions of lives, is it not only logical that this power be in the hands of the majority that work in these businesses and not in the hands of a few executives.

(Quote taken from DemocracyNow.org)

Bailout Firms Owe $220M in Unpaid Federal Taxes

"A congressional probe has found the top thirteen firms to receive bailout money owe more than $220 million in unpaid federal taxes. Congress member John Lewis of Georgia, the chair of the House Ways and Means Subcommittee on Oversight, says two of the companies owe more than $100 million apiece. The review only looked at the top twenty-three bailout recipients, leaving open the possibility of further owed taxes from nearly 450 remaining companies. The inspector general overseeing the federal bailout says he will investigate whether recipient companies misled Congress on their tax obligations."

Democratic businesses are proactively transparent with their financial information.

(Quote taken from DemocracyNow.org)

Politics & Democratic Business

If you ran the government like a democratic business, who would be correct? Conservatives or Liberals?

(1) Conservatives are correct that regulation is bad. It stifles progress, blocks creativity, hinders adaptation, and humiliates the majority that do the right thing.
(2) Liberals are correct that all centralized power should be regulated and limited by the people whos lives it impacts; ee.gg., banks and depositors, corporations and workers.
(3) Conservatives are correct that "government which governs least governs best" -- Ronald Reagan.
(2) Liberals are correct that workers make better decisions about business than their managers.
(3) Conservatives are correct that the disintegration of morals destroys every great nation. A study published last week shows that a record percentage of American high schoolers cheat. So much for putting political corruption behind us.
(4) Liberals are correct that direct democracy does not cause the poor to steal from the rich. When each person has equal political power, the poor do not care to steal from the rich and the rich are not able to steal from the poor. Which brings me to my next point...
(5) Conservatives are correct that redistributing wealth does not benefit the whole. The Soviet Union and Cuba have taught us this lesson.
(6) Liberals are correct that socialization--if it is at the local level--encourages progress; ee.gg., education, fire department, and health care. When people support their communities, the community supports the people.

We Should Learn about Democracy from the Chinese

There is very little authoritative difference between a government and a bank. To understand that all centralized power is dangerous and should be democratized is to understand that centralized economic power (like political power) must be democratized and must serve the entrepreneurs that create wealth.

In the same way that the Federal government and State governments are supposed to serve the people, the Federal Reserve, local banks, and Wall Street must serve entrepreneurs. The benefit of these institutions is to provide funding and diversify the risk to entrepreneurs. Arguing that free market policy should apply to Wall Street, the Federal Reserve, and local banks is as silly as saying that the Federal Government should be free to make it's own rules.

The best, current example of a democratic economy is the Chinese economy. While the Chinese are politically oppressed, their democratic economy is inspiring entrepreneurs and creating the fastest, sustainable economic growth ever seen. Maybe we can learn a thing or two about democracy from the Chinese.

My Ideal Company

My ideal company would have...

(1) a media department to help employees focus on the euphoric purpose of the company and to maintain transparency in the company
(2) the option of employee ownership
(3) one optional, paid hour per day allocated to employee fitness
(4) twenty optional, paid hours per year allocated to service projects of the employee's choice
(5) a one-year term for managers
(6) weekly personal-progress interviews

My Latest Letter to Obama

The U.S. is a democracy; yet, the dominant corporations of our time are run like oligarchies. Throughout U.S. and world history, this contradiction of oligarchies within a democracy has proven costly to lives, tax dollars, and many of our freedoms. A tax cut to organizationally democratic corporations will save and make the government billions of dollars a year and will recruit the talent needed to get us out of this economic crisis.

Corporations are legally obligated to put the interests of shareholders above all competing interests; when corporations are not organizationally democratic, the interests of the majority are often overlooked. Corporations have overlooked the interests of the majority...

(1) by evading between $250 billion and $300 billion in taxes per year. As a result, you and I pay 15% more in taxes every year--according to PBS Frontline. When corporations' financials are not transparent, the pressure to follow the crowd and use tax shelters to evade taxes is constantly present.

(2) by not making health coverage affordable. Wal-Mart and other corporations have encouraged their employees to apply for government health care assistance--instead of making medical coverage affordable. Government health care assistance costs the government billions of dollars.

(3) by outsourcing jobs to foreign countries. Billions of tax dollars have been lost to outsourcing.

(4) by paying CEO's 866 times more than minimum wage employees. That number has increased from 51 times in 1965--according to faireconomy.org. When corporations create many layers of management, the higher up managers receive large compensations at the expense of lower paid employees. However, when times get tough, having a large number of managerial layers ensures that layoffs will occur, and higher paid managers are consistently the ones laid off. Unemployment and low wages cost the government billions of dollars in relief.

(5) by underpaying their employee's pension plans. In 2006, PBS Frontline reported that corporations were underpaying their employee's pension plans by $450 billion. As you may know, in 2006, the government agency, P.B.G.C., was already in a $23 billion debt. The government can't afford to guarantee all of these and future pension plans that are dumped on the government during corporate bankruptcy.

(6) by constantly violating the law. In the 1990's, large corporations were sued for hundreds of millions of dollars for attempting to pass off costs and obligations to an unaware or unwilling public: (1) Exxon pled guilty to criminal charges related to the Valdez oil spill and paid $125 million (2) GE was guilty of defrauding the federal government and paid $9.5 million (3) Chevron was guilty of environmental violations and paid $6.5 million (4) Mitsubishi was guilty of anti-trust violations and paid $1.8 million (5) IBM was guilty of illegal exports and paid $8.5 million (6) Pfizer was guilty of anti-trust violations and paid $20 million (7) Odwalla was found guilty of food and drug violations and paid $1.5 million (8) Sears was guilty of financial fraud and paid $60 million. (Read about 1,000's of more violations at multinationalmonitor.org). The cost to the government for all unprosecuted violations is probably in the billions.

(7) by creating unfulfilling workplaces. In 2006, Gallup estimated that disengaged employees cost the American economy $350 billion per year. The lost tax-dollar revenues are also in the billions.

In contrast, organizationally democratic corporations are proactively transparent, offer ownership to all employees, and have very few layers of management (in proportion to number of workers).

During this information age, many corporations such as, Southwest Airlines, Great Harvest, 1-800-GOT-JUNK, the GE plant that produces Air Force One engines, DaVita, The Container Store, and Whole Foods (to name a few) are moving towards this new, democratic corporate structure. Not only does this new, democratic corporate structure attract the best talent in the U.S., but these corporations save and make the U.S. government millions of dollars. A tax cut to organizationally democratic corporations would encourage more corporations to become democratic. More organizationally democratic corporations would attract the necessary talent to pull us out of this financial crisis and save and make the government billions of dollars.

The largest obstacle for identifying organizationally democratic corporations will be to create a standard to determine which corporations are organizationally democratic and which one's are not. A consulting company called World Blu (worldblu.com) currently has a score card to identify organizationally democratic corporations. If you have any questions, visit my website at democraticbusiness.blogspot.com and make a comment.

What Are the 3 Biggest Obstacles to Democratizing the World's Workplaces?

Traci Fenton speaks at least weekly with CEOs of companies that will potentially use her consulting services to democratize their organizations. In a conversation I had with Traci Fenton (CEO of WorldBlu), she identified the three biggest obstacles to democratizing the workplaces of the world:

(1) Many people do not realize that there is a better alternative to oligarchical businesses.

(2) Many people are not willing to give up the feeling of control over their businesses.

(3) Many people are, simply, greedy.

Sounds pretty overwhelming. We are seeing, however, that the biggest obstacles are not as big as the biggest drivers of democratizing the workplaces of the world. Here are the reasons:

(1) The people of the world are beginning to think less of themselves as national citizens and more of themselves as world citizens.

(2) The information age is democratizing even the most undemocratic nations of the world.

(3) Oligarchical companies are losing the most talented people to democratic companies (e.g., computer technology industry vs. banking industry).

(4) More and more people are realizing that the current capitalist system has not benefited the majority of the world; yet, communism is no longer a widely attractive alternative.

Why Is Democratic Business the Obvious Solution to Me?

Yesterday, I attempted to explain why democratic business is so important to me as a solution to the majority of the temporal problems in the world. The answer is that my life experiences have molded my perspective:

I grew up in an affluent section of a big city. The benefits of capitalism constantly surround me.

I have attended church all my life. I was blessed with a heavy conscience and a reverence for human potential.

I have started my own business. After I spent months proving that the business concept was equitable, my financer demanded 90% of the business. I shut down the operations because I could not survive on 10% of the profits.

My father is an entrepreneur. He started two successful businesses. He and I have engaged in hundreds of hours of discussions about his day-to-day business concerns.

I have lived among the people in Brazil. I know what it feels like to look at the U.S. from the outside in. I have survived on one meal a day for multiple months, experienced diseases and ailments foreign to Americans, feared for my safety at the hands of local police, drunk brown water to quench my thirst, and fought off thieves to protect what little I had.

I have lived in Hawaii and learned of its history. I have visited the Dole plantation and I have learned from the Locals how the U.S. reluctantly annexed Hawaii after corporations forcibly removed Queen Lili'uokalani--a queen loved by her people and dedicated to nonviolence--in order to protect their business interests. I have seen the resulted poverty that effects so many natives on the islands.

I have a degree in business management with an emphasis in entrepreneurship. I have studied the Nash equilibrium, laissez-faire capitalism, and other theories that help "businessmen" justify greedy business practices. At the same time, I have learned about the successes of Muhammad Yunus, Fabio Rosa, Albina Ruiz, and many other heroic entrepreneurs that add value to the world and not just to their pocket books.

I have a minor in Spanish with an emphasis in Latin American studies. I have studied the literature of Pablo Neruda, Gabriel García Márquez, Gabriela Mistral, García Lorca, Octavio Paz, and the hundreds of other literary leaders that dedicated much of their lives and writings to fight corruption and inequality.

My collective experiences have offered me the motivation to search for a better alternative to the dominant and dominating institution of our time. I have come to realize that I would be selfish not to do all that I can to act upon those things I know to be true for the sake of those who don't know that there is a better alternative. For this reason, democratic business is so important to me.

Top Small Workplaces of 2008 Are All Democratic

All the 15 businesses of the Wall Street Journal's Top Small Workplaces 2008 are proactively transparent, 86% share a large portion of profits with employees, all of the businesses de-centralize and limit managerial power, and all of the businesses inspire a euphoric purpose greater than themselves.

All of the 15 Top Small Workplaces are proactively transparent. At Integrated Project Management Co., "each employee sits down for a weekly one-on-one meeting with his or her manager in which they discuss work progress, the employee's performance, and the skills that need improvement." At Jump Associates LLC, "every morning, all employees meet for a "scrum" -- a short get-together where they're briefed on company news." And, the office is laid out so that "all employees, including senior management, sit out in the open in "neighborhoods" of five or six workers." At Lundberg Family Farms, the President hosts a monthly "Meet the CEO" event "where a small group of seven or eight employees chats with him to provide feedback and discuss any concerns." New Belgium Brewing Co., also holds monthly meetings "where it walks employees through the company's financial statements." And finally, at Rainforest Alliance, "employees can do stints in foreign offices to learn more about the organization and work on the front lines."

86% of the Top Small Workplaces share a large portion of profits with employees, and five of these businesses are 100% employee owned. This is especially impressive because employee owned businesses make up only one per cent of all American companies.

All of the Top Small Workplaces de-centralize and limit managerial power. At ATA Engineering Inc., "At least eight to 10 ATA employees are involved in interviewing every job candidate. If one employee objects to the hire, the candidate may not be offered a job unless that employee changes his or her mind." Also, employees "can pursue projects that s/he feels are good for the company or that s/he is personally interested in without needing more than one person's approval." At J.A. Frate Inc., during the only layoffs in 37-years, "the board of directors asked employees to vote on taking a 10% pay cut, promising to reinstate their normal wages after three months. The majority of the employees voted for the cut and all the laid-off employees were later rehired. At Landscape Forms Inc., "if the whole team agrees on one employee's idea, it can be implemented -- without approval from senior management." Rainforest Alliance "gives many junior employees the chance to spearhead research and other initiatives for the organization, later promoting them to oversee those initiatives." And finally, the President of Redwoods Group Inc. caps his own salary at 10 times that of the lowest-paid employee.

All of the Top Small Workplaces inspire a euphoric purpose greater than themselves. The President of ATA Engineering Inc., was "nominated for a local "Entrepreneur of the Year" award. But he turned down the honor, feeling he shouldn't take all the credit for the company's success." At Decagon Devices Inc., "employees take turns bringing home-cooked meals to work for their colleagues." At Jump Associates LLC, "a coach stops in the office a few days a month to help employees with any issue, such as improving their communications or resolving conflicts with a colleague." At King Arthur Flour Co., "even employees who don't work directly with flour are encouraged to learn about baking." At New Belgium Brewing Co., employees are enthusiastic about supporting the company's environmental cause. "Each New Belgium employee is given a cruiser bike," and each year they "dress in costumes and lead local residents on a bike tour." And, "an on-site recycling center allows employees to recycle goods." And finally, At Redwoods Group Inc., "each full-time employee is required to do at least 40 hours of volunteer work annually for nonprofits of their choosing -- on company time." In addition, the company "donates up to $300 annually per employee to charities where employees volunteer their own time."

These companies empower their employees by being proactively transparent, offering ownership, decentralizing and limiting power, and inspiring a euphoric purpose greater than themselves. Democracy is not just giving people a voice. Democracy empowers the voices that people already have.

(Quotes taken from http://online.wsj.com/article/SB122347733961315417.html)

Democratic Business Can Save Our Economy

We are on the verge of the second worst (if not the worst) economic times in the history of our country. The best suited organizations to weather these times will be democratic organizations.

Suppose that Company A and Company B each have 3000 employees. Company A's citizens own 70% of the company. Company B is owned by the founder and two investment firms. Company A only has three layers of management and most of the company decisions are made by the citizens themselves. Company B has eight layers of management and the only time anyone knows about company decisions is when they read about them in the weekly memo.

What will happen when times become tough in the industry? Which company's citizens will take a voluntary pay cut? Which company will increase our nation's unemployment rate? Which company's citizens will work through the night for an entire month to make sure the company stays afloat? and Which company will survive?

You can be assured that many sacrifices will be required of American citizens during the coming years. A lot of us will be tested to our limits. If our businesses, communities, and country are important enough to us we will decide to endure. Our collective decisions will determine the future of our country.

Cisco Is Democratizing

You may know Cisco from their routers and switches that you can buy at most computer/technology stores, but now you may come to know them by their new, "revolutionary" business model.

Cisco is democratizing. According to legendary CEO of Cisco (and staunch republican), John Chambers, "The goal is to spread the company's leadership and decision making far wider than any big company has attempted before, to working groups that currently involve 500 executives.” In other words, Cisco is giving the decision making power of its executives back to its citizens. Formerly, “all decisions came to the top 10 people in the company” and the orders were sent back down from there.

Secondly, Cisco is encouraging an ownership mentality of its citizens by initiating a “new financial incentive system” that is causing “executives to work together like never before.”

Thirdly, "Cisco citizens are blogging, vlogging, and virtualizing, using social-networking tools that they've made themselves and that, in many cases, far exceed the capabilities of the commercially available wikis, YouTubes, and Facebooks created by the kids up the road in Palo Alto."

What is the result of all these “revolutionary” changes? John Chambers is most proud of Cisco’s ability to execute their collective decisions. Chambers noted, "The boards and councils have been able to innovate with tremendous speed." "One week to get a [business] plan that used to take six months!"

Cisco is democratizing our world. As a result of Cisco’s success, Cisco is sharing detailed case studies of their experiences and best practices with companies like AT&T, General Electric, and Procter & Gamble, and with customers in emerging markets from Russia and China to Mexico and Brazil. "We did it first ourselves; now we teach our customers. And the neat thing about it is that they'll use our technology to do it."”

(quotes taken from Fast Company’s article, How Cisco's CEO John Chambers is Turning the Tech Giant Socialist)

If Democratic Businesses Are More Profitable, Why Isn't Every Business Democratizing?

If Democratic Businesses Are More Profitable, Why Isn't Every Business Democratizing? Ask GE that question. Their most profitable plant is run democratically and they plan to run all future plants democratically; yet, they are not converting any of their current business to become more democratic.

I would guess that management doesn't make the change to democracy because managers in democratic businesses do not take as great a percentage of the profits and must decentralize the power.