If there were no way to profit, why would anyone, ever, open a business?
No shit Sherlock. There are only 2 basic business strategies- you either compete on price and be the cheapest source, or you differentiate your product in some way from the competition.
You’re right in that commodity prices and price-competitive items tend to settle out just at or above the break-even point, and it’s extremely hard to make a profit there.
But the telling thing is that not everything’s a commodity. As a matter of fact, few things really meet the definition, and most of them are raw materials like ores, petroleum, etc… or agricultural products, where one barrel of oil is exactly the same as another, just like one bushel of wheat is exactly like another. The fungibility of commodities are pretty much what defines them.
Things like televisions, bottles of wine, and athletic shoes are not commodities in that they’re not fungible in the market. There are significant differentiators between items within the category- famously an Air Jordan shoe is NOT fungible with a pair of Chucks, even though both may be categorized as “basketball shoes”. Similarly, something like a bottle of Chateau Margaux isn’t the same thing as a bottle of Yellowtail Cabernet Sauvignon. They’re both red wine, but that’s it.
So the point is to point out why your particular widget is better and worth more money than the other guy’s widget. Hopefully your marketing can be convincing to your target markets and your product can back that marketing up, and you can sell more of your widgets than the other guy and make a profit.
And wolfpup… you seem to think that the stockholders and the board are somehow separate and at odds with each other; you do realize that the board is elected by the stockholders, right? It doesn’t benefit the board to do things crazily against the stockholders’ wishes, because they’ll be kicked out of their jobs as board members, and can even be sued on behalf of the company BY the stockholders.
And since when does the pay of the CEO have any kind of relationship to what some low paid schmuck cleaning the toilets have to do with each other, other than be printed on the same check stock? The CEO of ExxonMobil is making decisions for a company with revenues larger than the GDP of most mid-sized countries (270 billion dollars), and the guy running the 15 person office doing engineering and surveying is doing stuff that’s a lot less monumental. But cleaning their toilets is the same exact job. So why should the Exxon CEO’s pay be limited by what a toilet-cleaner makes, when his job is clearly a lot higher responsibility than the engineering office CEO’s job is?
The fact is that jobs are (and to a great degree should) be paid based on their worth, subject to some reasonable legal constraints. It’s not the CEO’s problem that some dumb-ass fucked off in high school and isn’t fit to do any job but scrub toilets.
And they do not exist to provide a profit for the stockholders either.
That’s a silly statement. Unless they are operating as a non-profit, of COURSE they do.
Well, there are non-profit and for-profit corporations. The latter most certainly exist to provide a profit for the stockholders. They would not even exist otherwise.
Wow - a strawman conservative portrayal on the 'Dope.
In a free market, anyone is encouraged to come up with a competitive advantage and run with it. It could be via patents (which conservatives support), brand, better service, better product, smarter distribution, analytics on store selection, employees, etc.
There is ALWAYS room for improvement and a healthy profit margin. After that, you keep an eye on Porter’s forces and continue to innovate.
They exist to provide a means to invest, and divest, in a sensible fashion.
The CHOICE to invest is one of hoping for a stream of dividends and/or a liquidity event. Note that this is NOT gambling, it is investing with an assumption of risk.
I’m sure it’s possible to get a raise out of this kind of change. I didn’t say it wasn’t. I said such a rule wouldn’t lead to a massive raise.
And, presumably, it might go the other way too. I can’t think of any reason why this change would necessarily lead to higher wages.
But my point is that if the CEO is making, say, 400 times what the lowest paid worker is making, passing a law that says he can only make 300 times is not going to result in the CEO’s pay getting cut by 25% or in the lowest paid employees all getting a 33% raise.
It’s going to result in whatever it is that the lowest-paid employees do getting contracted out to some other company with a lower-paid CEO.
None at all. As a personal matter, I’d want to pay generously if I were in a position to do so.
Well, there were a passel of really stupid business people back then, so I wondered why you thought the hypothesis that business owners shoot themselves in the feet all the time was so odd.
Lack of respect, unfairness, bad working conditions, too much stress, unreasonable demands, outright bigotry, incompetence (especially when they think they are experts,) lack of planning. I can go on.
I made tons of money at Intel, but we all were expected to work from 8 to 8 for no good reason, the project was late and no one admitted it until months after everyone new, the metrics were ridiculous, and it became apparent to me that no one’s career was going to benefit from this thing. So I split, but it was easy for me because I was only there a year. People were leaving before their sabbaticals. 14 of the 15 people who reported to my boss (all managers or very senior engineers) left in the time I was there. Turnover at other projects was much, much lower.
I’m sure we all got paid more or less the same.
What’s the economic term for the belief that all economic actors are perfectly rational? I mean, I know the lay term for it–fiction–but I can’t remember the technical term.
Economic models work best if one assumes not only that every actor is perfectly rational, but also that financial motives are the only relevant motives. If a worker remains at a specific job, it’s because that job objectively offers the best financial compensation for the worker’s skillset. Other factors–a local, ailing mother, or a church community, or a gaming group from high school, or a tie to the land, or any of myriad other social or emotional obligations–don’t apply.
Except they do. A cafeteria worker at Harvard might earn better real wages by moving to (say) Seattle, but if that means leaving his sick mother behind to fend for herself, he may not be able to do that.
It’s possible to continue to analyze things financially, of course, to suggest that the worker is willing to pay a premium to remain close to his sick mother. But at some point, the monetary model becomes too chilly for utility. It’s better to use a rounded model that looks at things for what they are, in which money is only one factor.
As such, we don’t have a perfectly clean supply/demand model for labor. We can absolutely talk about the obligations of corporations to pay reasonable wages to employees, and the inability to set a precise, objective numerical target for what’s “reasonable” should not stop us, any more than the inability to determine the instant a child becomes an adult stops us from setting a minimum age for voting.
Sounds stupid and easy to work around. Contract out to a subsidiary or even a non-affiliated company the low cost work.
Please. Not the sick mother story again. What about the 99% of the folks who don’t have a sick mother? Do they get higher than market value pay, too?
Just to be clear, are you arguing that “rich corporations” have an obligation pay above market wages, or what? If you are, please spell out you reasoning. That’s wha this thread is about.
I listed a whole bunch of examples of what can tie people to a location and make relocating difficult. Did you miss that list? I can repost it if you’d like.
I’m sorry if you missed this part that you quoted. Here it is again:
As for my reasoning, the whole post included my reasoning.
And that is my point as well. Most of these markets are becoming commodity markets. Is there any difference to you between mcdonalds, burger king, or wendy’s? No, they all are racing towards the bottom, and the drek and terrible service you get from one is going to be pretty much the same as what you get from the other. How about the difference between fridays and applebees. They are the same crap. They have made themselves into commodities.
Higher priced items like cars and tv’s differentiate a bit, yes, but they still tend to be more of a commodity, most people look at the price first. Is there really that much of a difference between a chevy and a ford, between a samson and a panasonic? Sure, there are luxury cars like BMW’s and Audi’s, but they are not racing towards the bottom.
Luxury items, like high value wines are differentiated, even if only by perception. They have a brand name, and recognition. They can charge more, because they are not a commodity.
There are other food service places like smash bros or 5 guys that do provide a higher quality service and product. They also pay their employees better. That’s not a coincidence.
First, there are ways to profit, just not in a free market.
Second, if you open a business because you want to make money, then you are going to go out of business in the first year, and probably blame regulations or obama.
I opened a business because I got tired of getting into fights with bosses. The more control I had over an operation, the better and more profitable it would go. That is, until I inevitably stepped on someone’s toes, had a discussion about who was in charge, and then I would leave, usually causing them to descend into chaos in my absence.
I haven’t had that fight in over 4 years now, and things seem to be going quite well the way I am running them.
So, yes, pride, personal satisfaction, challenge, freedom, those are all reasons to open your own place. The idea of a guaranteed financial reward, not so much.
Your own word belie your statement. A corporation exists to bring people and resources together to accomplish what they could not on their own.
If they are a publicly traded corporation, (a subset of corporations), then yes, investors invest with the expectation of making a profit. As you pointed out, there are non-profits. There are also LLC’s like myself, that have no shareholders, therefore, no shareholders to profit.
People may not invest if they do not believe that they will not make a profit, but organizations of people and resources still would exist.
Not a conservative. A pragmatist. I pointed out earlier that there are ways of creating a monopoly through patents or brand name recognition. My point is that most companies don’t bother to try doing that any more, turn themselves into commodities, and then still expect to have not only profit, but increasing profits.
Can you tell me what the difference between investing with an assumption of risk and gambling is?
In theory, in the market, as it is a positive sum game, all players should get a higher return than they came in with (the house loses), but that is not guaranteed, and is absolutely not certain for an individual corporation.
I agree, I am just saying that that is not necessarily a bad thing. People could be better off working in a smaller company. I’ve always felt the further the bosses or investors are from the actual production, the more the production and the employees suffer. Smaller companies filling niches that larger companies cannot could go well.
I want to point out that I talk about a free market, not because that is what we have, but because people keep saying that wages are negotiated in a free market. My point that a profit is impossible i a free market proves that we do not in fact have a free market. If we do not have a free market, that is fine, but it then is necessary to look at the biases of that market, and how those biases may hold down wages to below their actual value.
Incidentally, your stats are off:
If you’re being hypertechnical, maybe half of 5.8 million, or 2.9 million is the people caring for a female relative age 65+. But I’m pretty sure you get the point: caring for adults who need assistance is a pretty common thing in our society, and can hamper relocating for a job.
Plus all the other things I listed :).
You also listed “ties to the land.” I thought serfdom went out of style, but evidently not.
Well, you listed the sick mother twice, so you only get to count that as one. 
But your others are not very compelling:
“a church community, or a gaming group from high school, or a tie to the land”
I guess a person has to make a choice: Does he want to support his family or stick with his gaming group from high school. Churches can actually act as an agent of help when moving to a new location.
You can always find a thousand reasons NOT to do something-- NOT to make a change. But if it’s important, you’ll do it.
Economic models may work best if we assume perfect rationality and the same preferences for everybody. However they don’t need either assumption to work very well. All they need is for some marginal cases to exist. Every case does not need to be a marginal case.
Some employees might like the prestige of working at Harvard, some might hate the horrible weather of Seattle, others might be motivated purely by money. Each of these people would have a different definition of a reasonable salary to work at Harvard. The good news is that there is no reason to set a specific price or to find out the exact correct wage for every worker. If the wage is too low then don’t work there. Every worker gets to make that decision. If Harvard is unhappy with the quality of the workers who are willing to work for a certain wage they are free to raise it to attract a better class of worker. At some point either Harvard and the workers will find the correct price or Harvard will no longer provide cafeteria workers and will contract out to a company that does it better.