Risk of stagnant ownership and leadership that isn’t collectively accepted

Capitalism can result in stagnant ownership and leadership. Leadership might not be collectively accepted by contributors in the organisation.

Critique

Capitalism can result in stagnant ownership and leadership. Leadership might not be collectively accepted by contributors in the organisation.

Risk of stagnant and unbalanced ownership

Capital based shares in capitalist organisations give the holder permanent ownership in an organisation. These shares often represent perpetual governance and incentive rights. As an organisation gets closer to profitability there is an incentive for existing shareholders to minimise the distribution of any new shares as this would dilute their own ownership in the organisation. This would reduce the opportunity for maximising future profits for themselves. This incentive creates ownership structures that can become increasingly stagnant and unbalanced over time. Existing shares are less likely to be sold to other people if the organisation is profitable and growing. Future contributions, regardless of their value and impact, can become more easily exploited in this environment due to the incentive for owners to not reward these contributions with shares of ownership that reflect the proportional value of the contribution.

Risk of stagnant leadership

Under capitalism, those in executive positions are selected by the board of directors. The board of directors are selected by the shareholders of the organisation. This ownership structure means that workers will often have little say in who gets selected to lead an organisation. This can be problematic in situations where a majority of workers disagree with the leadership over certain decisions. If workers need the income more than they dislike the decisions of the leadership there is a higher probability that they will stay in the organisation even though they might not want to. Shareholders have little obligation to listen to and respond to the preferences of workers unless an existing law or regulation already exists that determines what they can or cannot do. Workers may agree with leadership and their decision making at the beginning of an organisation however this can change over time. If this does happen the workers would have little to no authority to change the leadership. Workers may have invested years of their time and effort to then experience a change in priorities from the leadership that leaves them in a situation where they feel the need to leave the organisation that they helped to build up from the beginning. Alternatively they would have to accept the leadership even though the majority of workers might disagree with their decisions. Workers are reliant on the shareholders to identify and replace poor leadership in these situations. Leadership could remain unchanged and become increasingly stagnant if the priorities of shareholders are being addressed. Leadership that is generating a lot of profit for shareholders could result in a lower incentive for owners to change the leadership when this current arrangement is working well for them. Shareholders may decide to ignore other factors such as worker discontent and any disagreements with leadership if the leadership is generating a large profit for the shareholders. Shareholders can keep their shares over the long term, they have no obligation to sell them. New shares might not be issued due to the organisation already being profitable. Stagnation in ownership or leadership can result in the same people governing the organisation for a long period of time. There is an ongoing risk that the leadership might not be well aligned with the priorities and preferences of the workers that contribute towards the organisation.