Employee Stock Ownership Plan Organization, or ESOP, is a business model designed by Kelso during the height of the Cold War.
In the battel of Capitalistic West and the Communist East, economics was at the core of the struggle.
The Communist forsaw the inequality that would be created by those who are able to raise capital, leverage technology and organize workers into units to produce industrial goods on a massive scale.
Their solution to this was to have have the state control over all production.
But this lead to an enormous concentration of power in the hands of the government, creating a concentration of wealth higher than Capitalism ever was capable of, stifling economic actors and ultimately destroying its economy.
The battle lost by the Communist did not mean that the criticism leverage by it towards Capitalism was inaccurate.
They were right in that Capitalism left unchecked, leads to high levels of inequality.
Kelso saw this, but instead embracing the solution put forth by Marx, which he saw was undemocratic, he drew up plans for an new economic structure that is compatible with our western values.
His plan was the Employee Stock Ownership Plan.
To put it simply, instead of compensating workers with only pay, owners would also pay a share of stocks to their employees.
This is akin to Steem where the employees ( Steem content producers) are paid both in payment (liquid Steem) and stocks (Steem Power).
His ideas lives on today in his company, Kelso and Company, an investment firm. Others have adopted his approach as well.
This new kind of structure brings with it new characteristics.
Drawing from a research paper done by Professor Joseph Lampel, Professor Ajay Bhalla from Cass Business School, City University, London and Dr. Pushkar Jha from Newcastle University Business School, Newcastle.
There are a few benefits and draws backs of ESOP.
Here are key findings in their report and how it manifest in Steem.
- EOBs have a stronger long-term focus. Non-EOBs are more conservative when it comes to balancing short- against long-term response to changing demand conditions, and are more preoccupied with efficiency and costs. EOBs are more likely to favour activities that have a long term payback horizon and put greater emphasis on forward growth planning
Employee Owned Busineses (Their term for ESOP) have a stronger long-term focus compared to Non-EOBs. Whereas traditional business are more focused on short-term profit to satisify shareholders, EOBs favor activities that have a long term payback horizon and put greater emphasis on forward growth planning.
Anyone who have used Steem before have came encountered the 90 day long period for powering down.
This design was to encourage long-term thinking of the token holders can help prevent massive capital out-flow and hostile takeover of the company.
By locking up tokens for 3 months, it diminishes the impact from the day-to-day fluctuation of the token price on the employees.
- Increasing employee representation at board level can improve EOBs’
performance. Increasing employee representation by less than 30 per cent had no impact on performance, but increasing employee representation by at least 30 percent had a significant impact on performance. However, increasing representation by more than 60 per cent does not deliver additional benefits.
Technically speaking, all of the witnesse reflect 100% of the stakeholder interest as they are voted in. But in reality this is not the case as whales have a significant influence over who gets to become a witness. This is akin to the executive deciding who gets to become the board member.
This creates an ineffective board that rubber-stamps the actions of the executives.
A more effective method might be that instead of direct Steem Power voting, there could be a second weight that takes into account other factors such as reputation, post statistics (comments, reblogs, likes etc).
- EOBs invest more in human capital than non-EOBs
This is generally true of Steem, and one of Steem's greatest strength. Writers and content producers are encouraged and supported to increase the quality of their content.
- EOBs face greater problems when it comes to raising capital and dealing with
regulatory requirements
Raising capital in the context of Steem means selling more tokens. Whereas other cryptocurrency projects often received outside fundings, Steem seems to lag behind in this respect, confirming the observation. Though it is unclear how much this is due to the nature of Steem or simply the leadership team have not put in much effort in this front.
As for dealing with regulatory requirements, this would be interesting to see how Steem deals with the GDPR.
- EOBs get more of their growth from adding new customers compared to non-EOBs, particularly in the professional services sectors.
Steem is a social network, and it benefits by adding more users.
- EOBs show greater preference for internal growth over external growth, this is particularly true for manufacturing and processing firms.
Interal growth can be classified as activities such as promoting more quality content. External growth is akin to expanding into new media areas.
This is definitely the case, as writing remains the core of Steem, and photographic and video content are less relevently.
- EOBs have a more positive media image than non-EOBs, particularly in the
manufacturing and processing sectors.
Steem compared to Reddit or Facebook has been reported postively.
- Employee commitment supports the strategic imperatives of EOBs according to which sector they operate in.
Steem is the publishing industry. And the Steem community generally support more transparency and support for free-speech.
Sources:
https://en.wikipedia.org/wiki/Employee_stock_ownership_plan
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/31668/12-929-employee-ownership-advantage-benefits-and-consequences.pdf