Flawed justifications for unfair contribution treatment

Earlier contributions are excessively rewarded at the expense of future contributions. Commonly used reasons to justify an excessive reward for earlier contributions are not fairly justified.

Critique

Earlier contributions are excessively rewarded at the expense of future contributions. Commonly used reasons to justify an excessive reward for earlier contributions are not fairly justified.

“Risk of loss”

If someone contributes towards a new organisation there is a risk the organisation fails and that they never receive a fair return on investment for their contribution. These contributions deserve to be rewarded more than a contribution that doesn’t face this risk as otherwise there is less of an incentive for people to start new organisations. The problem with this truth is the risk that contributors are taking on is not infinite. There is only a finite amount of risk that is being taken on. For instance there might be a 10% chance that the organisation will succeed, meaning the contributor is taking on the 90% risk that it doesn’t. In these scenarios it could be fair to reward the contributor with 10 times the value of their contribution due to this risk. Under capitalism, this contributor is instead given shares of ownership that give them perpetual governance and incentive rights. This means the risk can be excessively rewarded far beyond the 10 times multiple that would have been a more reasonable reward based on the risk they initially took on.

“Took the initiative”

Taking any initiative in an organisation should be rewarded regardless of when the contribution is made. If someone takes the initiative to contribute beyond expectations and then generates a large amount of value and impact for an organisation it would be fair and just to reward that contributor for those efforts. It would not matter when this contribution happened. Aligning the incentives within an organisation means that any contributor should be rewarded for taking initiative to provide value and improve the organisation.

“Started the organisation”

Starting an organisation by itself is not a highly complex contribution. For a limited liability company these processes are often well structured and usually require someone to fill in a number of forms and pay an initial setup fee. What is more valid and important in terms of rewarding contribution fairly is that the value of the contributions and the risk of loss when making those contributions is taken into account when evaluating what compensation is fair and reasonable. Starting the organisation is an important initial contribution. However this contribution does not justify the unfair or unequal treatment of future contributions. All contributions should be treated fairly and equally regardless of who started the organisation.

Importance of rewarding risk taking

The main factor that does justify an increase in reward for earlier contributions is the risk of loss. Under capitalism, this risk of loss is rewarded in perpetuity even though the risk is not infinite. Calculating a rough percentage probability of success or failure can help with determining a more reasonable and fair reward for contributions that are taken on this risk of loss. Both capital invested and labour contributions made towards the organisation should be rewarded fairly by taking into account the risk of potential loss. However both of these contributions should not receive perpetual compensation and reward for a finite amount of risk. All contributions are important to an organisation and should be rewarded fairly. Earlier and riskier contributions should receive an increased amount of compensation to respect the risks of loss involved in making those contributions.