Should employees have access to company books?

In the NFL lockout thread, people are discussing whether employees should have access to company books, especially in a collective bargaining context. I believe employees ABSOLUTELY should have access, so they have a sense of how profitable their boss is, and if they are getting a fair shake.

The books of publicly traded companies are already public through SEC filings.

And conversely, at least part of the reason someone might choose not to publicly float their company is that they view this disclosure requirement as undesirable.

The argument is that only owners (public shareholders in public companies, team owners in the NFL, restaurant owners in restaurants) have any business knowing what the owner’s income or profitability is.

Does anyone tell their babysitter how much they make?

Not being in a public company, I won’t speak for them, but as someone who runs a private business (including payroll, insurance etc…), I’d say no. What an employee is worth, how much they get paid, how much of their insurance premium they’re responsible for etc., shouldn’t have anything to do with how much the company makes. Besides, I’d be surprised if most employees would understand what they’re looking at.

3 very quick examples
1)Many many many years ago one of the employees found out my father (the owner of the company) had just purchased a piano. She was very angry since she had recently been turned down for a raise. Her argument was “What, I can’t get a raise but you can buy a piano?” Is this someone you want seeing how much the business takes in?
2)Just before last Christmas, my father and myself were sitting at a bar. The bar (and steakhouse) was closed, but was open to people coming in for gift cards. We were in there talking to the owner. Also present was the general manager’s father who was usually hanging around drinking. Over the course of about a half hour, they probably sold close to $2000 worth of gift cards. The GM’s father said, and I quote “You’re gonna need a wheel barrow to get all this money home”. We had to explain to him that this isn’t all free money for her to take home with her. I know he doesn’t work there, but pretend like he was an employee…is this someone you’d want with access to your books, asking you for a raise?
3)A loooong time ago. I was probably 9 or 10. I was at work with my dad (remember, he’s the owner). One of the cashiers commented that we had been very busy that day. She was much older then me and just making idle chit chat. I was probably wandering around waiting for my dad to get ready to leave. I still remember her making a comment that he gets to take all this money home for himself every day and how much money he must make. And I still remember my pre-teen self looking at this high school girl and commenting that “uhhh-no, he needs to first pay you and everyone else and pay for all the stuff we sold and lots of other things first he doesn’t just put all the money in his pocket every day”…again, is this someone you want looking at your books to decide if she feels she’s getting paid a fair amount?

Anyways, I know these situations are a bit different and I know I deal with a lot of younger kids, but I still don’t think people would really understand. But I’ve been hearing people say things like the above all my life, I’ve heard high school people working for their first time say it, and I’ve retired union factory workers say it. I know some people understand how this stuff works, but a lot of people truly don’t get it. Some people truly think the owner grabs the money out of the cash register and puts it in his pocket every night. They see my Dad driving an expensive (to them) Tahoe or Grand Cherokee and think they must be swimming in money but don’t realize that I grew up more or less without a Dad because he was working 90-100 hour weeks building the place up…that’s why he can afford nice things.
Like I said earlier, I really don’t think what people make should be based on what the company makes (at least not in all situations). Secondly, I don’t think most people would understand what they’re looking at. If business owners were forced to show their books to the employees, I’d love it if employees had to be educated on what they were looking at first. I’d like to see a very quick very basic accounting class first. Nothing to in depth. How to read a P&L and BS. Understanding what a profit margin is. Understanding how much an owner really gets too take home after all is said and done. What kinds of expenses are really involved in running a business etc…

No. I would say, though, that employees should be completely free to request them as part of the collective bargaining process.

The goal of the idea seems to be to absolutely minimize profit.

If every company minimized profit, that would mean that they had no finances to grow. Given that we have a growing population base, that means we would effectively have growing unemployment at the same time.

Money which is “profit” isn’t, despite what many believe, swooped up and placed into the CEO’s pocket. That’s money which gets earmarked for expansion and rainy days. The more of it, the better for the company. Yes, the more of it, the less that the current employees are getting, but remember that the corporation is the world’s most successful social security program yet devised. Not only is it self-sustaining, not only does it produce goods for the rest of society, but it even spends a lot of time and energy figuring out how to get those goods to the people more cheaply, efficiently, and continuously. If the companies are unhealthy, they go under and all of those people are suddenly making $0 a year.

Let’s also note that if a business’s profit level shrinks because of wages, but investors still require that the company grow, then the business will need to raise prices on goods. The increased wages will be eaten at a higher rate than before, so that everything equalizes.

Notice for example that tax rates in Scandinavia go up to 80% of personal income, and yet the lifestyle there is effectively the same as in the US. An economy is like water. It’s very hard to create a change that actually changes anything.

When the employees are paid a percentage , the books should be open. When the owners are claiming financial hardship, they should prove it.

That’s a different scenario (and I’m not sure if that’s what the OP was referring to). In that case, I also think there should be some proof that the books aren’t being cooked. (Most likely that they are signed off on quarterly by an outside CPA firm. This is common in larger business with bank loans). In certain businesses, it’s so easy to do it’s not even worth looking at the books.

Yes Joey, that is implicitly what I meant. BTW, someone mentioned up-thread that an employee denied a raise whose boss bought an expensive car (house, whatever) has EVERY right to ask,“So you can afford that conspicous consumption, but not a modest raise for me?”

To be fair if employers don’t let you see the books, employees shouldn’t have to put up with cries of “poor” or “we can’t afford it.”

If an employer is requiring a cashier to handle cash, wait on customers, act as security and stock shelves, all right fair enough.

But if said, employer is buying expensive cars, jewelry and the like instead of hiring a new employer then you have problems.

The problem is employers are always crying “poor,” to their employees to justify cutbacks, yet they never back it up.

As I said, if that’s what it takes fine, but to be fair, you can’t have it both ways

I’ll give you an example in 2003 the GM of a hotel announced the company can’t afford to give anyone a cost of living raise or any raise. Fair enough, but then he spent over $2,000 to get his office “Feng shui’d” because he felt his energy was off.

It’s pretty hard to justify that and it caused a lot of problems. Except for him when he quit two months later.

Sure they have the right to ask anything they want. But an employee’s raise should have nothing to do whatsoever with what the company can afford (assuming they can afford it) and everything to do with their performance.
If I own a business (which I don’t) and I want to buy a car at the same time an employee wants a raise. Well, if that employee doesn’t deserve a raise, there shouldn’t be a question. If the employee does deserve the raise, it’s still up to me to decide if I want to give them one or not. As the owner I’m still well within my rights to deny the raise and buy the car for myself instead.

Also, I don’t think how a sole proprietor (what my father is) spends his take home money is anyone’s business.
Look at it this way. If you ask me for a raise, and I denied it and told you I can’t afford it right now, but just bought a car, you feel it would be alright to point out I can’t give you a raise but I just bought a new Lincoln.
What if instead I told you I’m not going to give you a raise because I know you have a two bedroom apartment and live by yourself or that you go out drinking every night and if you cut back you’d have a lot of extra money (or that you have an expensive hobby etc…)…it’s not my place to tell you what to spend your money on, just as it’s not your place to question what I spend mine on.

That’s all well and good, but only one of those two people actually gets to decide who gets what. Your turn-the-tables example would impress me more if both parties’ compensation was determined by a neutral arbiter.

It’s not entirely one sided. If you ask for a raise and get denied (for whatever reason, doesn’t matter what it is) you have a choice. Accept your current wage or quit. Wisconsin is an at will state, no one is forcing you to continue working here.

“At will” is the law in most states, but it has never impressed me as a moral position. The choice of “take it or leave” is in no way comparable to the kind of choice that the employer gets to exercise.

If you’re worth that much money, someone else would hire you at that amount. Your original person is now down a trained employee and unwilling to keep up with the going market wage so that position is liable to sit empty or go to the worst person.

It’s not a one-sided issue.

Such as what?

On the other hand, you should see how unemployment favors the employees in Wisconsin. I had an employee start working with us as a second job. After a few months her original job shifted her hours around. She showed us her new hours and they were set up in such a way that working for us was no longer feasible any more. IIRC, she was going to be working her first job 8-4 M-F. She couldn’t work after 4 or weekends and couldn’t work before 8 because she had to get her kids to school. So we let her go and hired a replacement to take her shift. She filed for unemployment and won. I disputed it as an “availability to work” issue. The judge ruled that “to be unavailable to work, you must be unavailable for any work, since she is holding down another job she is clearly available to work” Judgment to the employee. How is that fair to me? There was absolutely no way for her to work for me anymore and I have to pay her unemployment.

A former employer of mine had 2 sets of books.

I am not sure I would have liked looking at either of them . . .


Like WorldComm and Enron guys decimating 401ks, while buying goldplatted walking sticks.

I sort of eluded to that earlier. A lot of small businesses do, especially cash heavy ones. There was one place we sold produce to that told us they didn’t want any invoice and they paid in cash. Turns out they took in so much under the table, they had to pay a chunk of their bills in (under the table) cash to keep their margins in check*. Of course we made the bills and recorded everything on our side, we just threw out their copy. If they ever got (or get) audited, we’re not going down with them.

There’s a staggering amount of ‘tricks of the trade’ for sneaking in money under the table.

*If they were to get audited, their margins would appear far to small. For example the IRS might know that their business should be operating at a 70% margin, but if it’s only running at 55%, they’re going to wonder where the extra income is. Paying some of the bills with their own money and not putting those bills into their accounting software will bring the margins back up to where they need to be.

I guess I am helping fight ignorance by outlining some of the things I was aware of (without looking at the books):

  • Another company in financial trouble was ordering stuff from us, and us from them, to make both companies look bigger so more $$ could be borrowed

  • We were borrowing money to make the stuff the other company ordered (to make payroll actually)

  • We were borrowing money against the future sales to the other company

  • We were making test equipment for our company (that we did not need) to inflate the assets of our company

  • we borrowed money to buy stuff from the other company that we supposedly needed to make other orders for other customers

  • we sold some facilities and leased them back, and I think we may have done that more than once

  • I am pretty sure some industrial waste we should have been paying to have disposed of was probably put in barrels and then put in a storage facility that we stopped paying for. (Someone got a surprise at an auction eventually)
    I quit before they went under . . .