Risk of motive, priority and incentive misalignment

The motives, priorities and incentives of capitalist owners and leadership can become increasingly misaligned with workers.

Critique

The motives, priorities and incentives of capitalist owners and leadership can become increasingly misaligned with workers.

Misaligned motives and priorities

Under capitalism the motives and priorities of capitalist owners do not need to be fully aligned with the workers. They also do not need to be fully transparent to workers and other contributors. Capitalist owners could state that they have certain priorities that are aligned with the values of the workers but their actions and decisions could provide evidence that they have other priorities and motives. For instance, a pharmaceutical company could state its most important priority is consumer safety and that their second most important priority is generating profit. If the pharmaceutical company decided to cut corners to save on costs during the trials of a new drug or vaccine, this could help with revealing an ulterior motive and reality that the owners are actually prioritising profit over consumer safety. A lack of collective ownership and representation in decision making can lead to these situations where a minority of capitalist owners can make decisions that are not aligned with the values and interests of the majority.

These misaligned motives could create a highly demotivating environment for workers. Workers could feel less confident about what the organisation is truly prioritising and what the owners actual motives are. Workers could also feel alienated in situations where there preferences and opinions about what should be prioritised in the organisation are ignored and not properly represented. Organisations that have hidden motives or that provide workers a lack of ability to influence organisation priorities can leave workers in a situation where it is more difficult to align their contribution efforts with their values.

Misaligned short term incentives and values

Capitalist owners can have incentives to adopt practices like cost-cutting, layoffs and stock buybacks to improve their financial metrics in the short term. These practices can harm the company’s long-term health and the well-being of its workers. Employees that are not sufficiently rewarded for their contribution efforts would not be incentivised to work hard for an owner that exploits their labour. Capitalist owners have the incentive to outsource labour, to cut costs by avoiding environmental regulations and to not fully comply with local regulations if it means it will generate more profit in the short term. These practices can be misaligned with the values of the other workers in the organisation and create a demotivating environment for people to work in.

Misaligned incentive to issue shares

Capitalism adopts a capital share based ownership system where shareholders are given perpetual incentive rights in the organisation. This can make it more common to overcompensate the earlier contributions as a larger amount of shares is often distributed during this initial phase of an organisation.

Shareholders are incentivised to minimise the dilution of their ownership whenever this is possible as this would reduce any future profit they’d receive. This incentive and approach to ownership can lead to an increasingly uneven distribution of incentive rights over the long term. The distribution of any financial reward for contribution would likely not reflect the fair value of each person's contributions made towards the organisation. A worker could make a contribution that completely transforms the organisation. That contribution could make the organisation far more valuable than it would have been than without this person's contribution. Under capitalism, this worker would not be entitled to receive a fair reward based on the value and impact of their contribution. Instead they would rely on the goodwill of the capitalist owners to reward them for the value they have provided. Shareholders are still incentivised to reward these contributions enough so that these type of contributions continue to happen, but not too much that it would sacrifice their own profits achieved through company growth or dividends. Capitalism incentivises the perpetual extraction of profit generated from workers labour.