A New Corporate Vision – The Constitutional Partnership Corporation

[In the 'Hiroshima+66, Detroit+Welfare' comment stream RR reader Michael Rogers introduced us to the John Lewis Partnership, a unique type of worker owned/controlled corporation that has a ‘constitution’ as its organizing and operating policy document – let’s call it a Constitutional Partnership Corporation (CPC).  MichaelR launched a comment thread that expanded its examination.  RR readers are familiar with my concern about the growth of US un(der)employment which I project to be over 70 million by the end of this decade.  This will call for massive wealth redistribution which I have discussed extensively in these pages and in my Union column (here).  I introduced the Non-Profit Service Corporation (NPSC) as a stake in the ground for starting a discussion about how to accomplish such wealth redistribution.  I have elevated MichaelR’s thoughtful and extended comment into a post of its own to invite development (integration?) of his expanded CPC and the NPSC ideas.  For continuity, please see the 'Hiroshima' comment thread. gjr]

Michael Rogers

Since when has complex design ever stopped us? We flew to the moon, built the Panama Canal, the Transcontinental Railroad, and the modern economy that has brought security to billions worldwide for gosh sakes.

I am not happy with (the John Lewis Partnership) constitution either -- not a tight feedback system as I see it. I also am not sure I see robust checks and balances or separation of powers in their design. However, they do seem to have created a stable management system that has a good deal of accountability built in, and appears to have legitimacy in the eyes of at least the long-term partners.

I think that a system like this applied to Detroit would necessitate the elimination of unions and the imposition of personal responsibility on the individual worker level so that working partners would need to focus on the efficiency of their unit in particular, and the coordination of the entire company in general, in order to get their wage or benefit desires fulfilled. Also, the more self-managing a unit was, the fewer managers are needed and thus more resources are available for higher wages/benefits or shorter work weeks.

There might also be the possibility of passing legislation where Industrial Democratic Incorporations are giving special tax-exempt (or at least tax reduced) status and long-desired deregulation could be achieved with bi-partisan support based on the premise that an Industrial Democratic Corporation would have a self-regulating, tight feedback design and does not need the regulatory oversight that an open loop control, traditional corporate management system does.

This could be extended to a drastic reduction in OSHA and Labor Law interference which were all predicated on an adversarial worker/management dynamic. When workers have the right to redress their grievances within an internal structure then the need of a nanny state to meddle is reduced if not eliminated.

It might also be possible to achieve a privatization of Social Security as the accountable and elected corporate officials in the pension division of the company would act as professional managers of the retirement portfolio of the partners thus reducing the likelihood of waste, graft, or stupidity diminishing the value of the portfolio -- and the portfolio manager who achieved a 55 year retirement age would be carried around the company on gilded litters as if he were a conquering Roman general.

The financing to build these companies could come from tax free government bonds which would create a tax advantages investment vehicle for the "1%" so that, rather than worrying about taxing the rich, the left could be focused on convincing them to invest.

You spoke of the ephemeral nature of our monetary system and the disconnect from anything of tangible value. I have even imagined the possibility of the growth of a stock standard, where the bonds of self-regulating companies become a currency of value. Where the stock of smart, well-run companies with solid markets, low levels of debt, and abundant tangible assets are traded at a premium and the bonds of poorly run companies with speculative markets and highly leveraged are discounted to their true market value -- these bonds would become the currency of trade and the ability of government to reduce or manipulate their value is eliminated.

Comments

[Michael Rogers]

I like the link to your Rep Central Committee speech. Constitutional Partnership Corporations could be the Ice Cream Cone you speak of -- however the cone is laced with hidden personal responsibility, reduction of the power of government, local control, tax relief and hard work as the path to achieving your desires.

I also forgot to mention that the unemployment system could be systematically dismantled and people out of work assigned to a CPC to wash dishes or sweep out the shop floor. This would not be wage slavery as the individual, if they work hard, get clean, get straight, earn others' trust could rise to be the president of the company -- they just enter the company at level of their competency.

I'm off to Grandmas for Thanksgiving. I am eager to see the contributions to this thread upon my return (although I will probable go out the garage and check the posts like a sports addict at his wife's Christmas Party).

[D. King]

How would this system handle affirmative action and nepotism?

I have found that the designers of new systems tend to fill their own need for employment. :)

As a side note, my aunt retired from John Lewis in Edinburgh, Scotland. (she loved working there)

[George Rebane]

DaveK 1015am - I believe affirmative action, if not dead already, should be phased out. Equal opportunity should be reinstated in place of equal outcome. All of the above can only happen under a totally new tax code, which could be an invitation for the start of for-profit educational (school) CPCs. The role of NPSCs in operating school systems has already been introduced but not exhausted. Also interesting to include into the mix is the 'compassionate economics' (q.v.) that was introduced into these pages by Paul Emery.

Would also love to hear more from your aunt about working for the John Lewis Partnership.

[D. King]

"Would also love to hear more from your aunt about working for the John Lewis Partnership."

http://www.johnlewis.com/Shops/DSShop.aspx?Id=2

She is now an OAP (old age pensioner) and receives her state pension and a supplement from John Lewis. It’s a big deal to her, and a source of pride. I don’t know much more than that.

[Mikey McD]

Focus on solutions to our failed education system? Focus our nations values system on progress through STEM learning in conjunction with promoting entrepreneurship.

The fate of society is found in the values of said society.

[Megan]

I've been reading about John Lewis a little, and I must be missing something. How will this model change over regulation (corruption in government)? Wouldn't it be better to reform government and get back to a free market than to add another vehicle for graft, bureaucracy and power grabbing? Why do we need corporations in the first place? Wouldn't companies be more responsible and accountable if someone was actually accountable and responsible? As for Detroit, your last post pretty clearly pointed out that the culture precludes a John Lewis solution without first suffering through suspension of all federal welfare.

[D. King]

George,
I emailed my family in Edinburgh, Scotland.
I'll let you know what they say.

[Michael Rogers]

"I believe affirmative action, if not dead already, should be phased out."

As a company, affirmative action would not be mandated. In fact, I believe no one would want their pensions managed by anyone but the most skilled individual. The challenge, as I see it, is to create interdependence between high functioning and low functioning employees.

One possible example is the Puzzle Class Room as studied by Social Psychologist Elliot Aronson. Aronson was brought into the Austin School System after forced integration where they had daily knife fights in the halls. He and his grad students started by just watching what was going on. They discovered that the teacher was an omnipotent force with ultimate power over reward/punishment/shame. The highly functioning kids in the front popped their arms out of the socket to answer the question. The kids in the back were not as prepared for a variety of reasons -- sometimes (but not always) completely out of their control like substance abuse by parents. The teacher made a compact not to embarrass the kids in the back if they did not disturb the kids in the front (thus implementing social promotion). The kids in front tended to be white and the kids in back tended to be black or latino, however race had very little to do with the dislike each group had for each other. The front kids saw the back kids as sullen and stupid, and the back kids saw the front kids as pushy and rude.

Aronson changed the lesson plan to build in inter-dependencies, so the ambitious kids in the front needed the kids in the back to get a good grade, and the kids in the back needed the kids in the front not to be embarrassed.

Suddenly the kids in front started being helpful instead of snide and sarcastic and the back kids started to see them as helpful. The front kids learned a little about how different the lives of the back kids were from them and developed empathy and realized that they were not stupid (they just had different things they needed to learn -- like how not to get beat by your Mom's alcoholic boyfriend), or they just need a little more help because they had not yet learned the same skills.

By creating a business organizational system where the high functioning (despite of race) needed to win the trust and respect of the lower functioning (and the amount of their salary was dependent on how hard and efficiently everyone works, and what everyone thinks of their contribution to that success) creates a "puzzle work space" that could eliminate racial stereotypes on all sides, but I believe also has the highest probability for financial success.

I, for one, would not tolerate anyone in "my" company who wasted time or resources on non-productive racial issues, and, I do not believe that they would obtain significant positions of authority.

If I know people, I fully trust that the entire company would be laser focused on identifying and rooting out incompetence, waste, and nepotism of all kinds and every level of the company would have tight feedback controllers to insure optimum self regulation in these areas.

[Michael Rogers]

"How will this model change over regulation (corruption in government)?"

My strong feeling is that the main source of the corruption comes from powerful economic forces that are open loop controlled with little or no accountability or need to adapt to feedback, whether from the market, investors, or workers (this includes unions, environmental organizations, and large corporate interests). No government reform will be effective or sustainable until the source of the disease is transformed.

Liberals will fight tooth and nail against deregulation, small government, and low taxes as long as they fear and mistrust large economic enterprises and see progressive government as the only bulwark against what they view as predatory practices. However, I believe they could be convinced to support the traditional conservative values of small government, deregulation, and low taxes if they felt like they had a vested self interest in those policies (the Free Ice Cream George speaks of)

A new type of corporation, with tight feedback control, that was self-regulating, constitutionally formed, with elected accountable leadership completely removes the traditional arguments of the left against these values.

[Michael Rogers]

"Why do we need corporations in the first place?"

Without corporations most of the world population would die within months.

I am not volunteering to "go gentle into that good night". For I will "rage, rage against the dying of the light". (Nor am I volunteering my children.)

I hope you are not seriously suggesting that we all revert back to hunters and gatherers, are you?

[George Rebane]

MichaelR - Excellent responses. But all of your arguments for achieving a rapprochement between the collectivist and conservative require that both start with some commonality in their axioms, and then apply the same logic in their subsequent reasoning. The absence of this has been the biggest disconnect between the two sides.

For example, the progressive mind sees nothing amiss with public policies that provide expanding government services which take an ever increasing fraction of a nation's GDP, thereby satisfying the most primitive notion of unsustainability. In the US they do not see the obvious train wreck in our common future, as they continue blind to the current unsolvable crises in the eurozone.

As argued by some leading Left intellects in these pages, EU socialist policies are to have been followed in the US simply because the inevitable catastrophes had yet to occur in Europe. Now that they are happening for the exact reasons predicted by conservatives, the Left simply puts on a straight face and blames the whole thing on the failure of free market capitalism, a system which has been little practiced on that continent for almost a century.

[Michael Rogers]

I simply wonder if it possible, rather than approach them at the fortified walls of the "size of government argument", to slide around to undefended flank of self-interest (ice cream anyone?) and work to create an environment where they are given the opportunity to earn something to conserve (for that is how some claim that people become conservative anyway, right?).

If a large number of people could be brought into a for-profit enterprise that they feel is fair, with the benefits of the enterprise going to those who earned it (not just to those who's granddaddy did), and designed with tight feedback controls that encompassed workers, investors, and customers -- well then, I think the voice of those speaking for the elimination of corporations and currency would be marginalized.

Instead, I see those voices becoming mainstreamed because of the excesses of open loop controls at the core of many (most?) large scale corporate enterprises. Does the TEA Party acknowledge that the first Tea Party was primarily about middle class tea merchants' anger at the collusion between big government and big business, thus creating an anti-competitive market where the East India Company (the first multinational corporation, with its own standing army and the power to inflict the death penalty) used its Royal connections and payoffs to get the King's Army to enforce their exclusive tea monopoly?

So, in my mind the Tea Party should be not merely be focused on evils of big government, but also on evils of big businesses with open loop controls who use their political connections to isolate themselves from the feedback of a competitive marketplace.

Do I delude myself to think there may be a common axiom here to build on? I believe that most Americans share the vast majority of conservative principals. The challenge I think that many have is with the perception that conservatives are only concerned with big government. That a blind eye may be turned to the tyranny of the big business and that conservative principals are not be applied consistently to the rising form of government in the world -- corporations.

If we are indeed in the age of the corporate state -- what can conservatism teach us?

[Michael Rogers]

If you accept my premise that we are in the age of the corporate state (and you may not, but for sake of discussion), in conservative thought what would define a collectivist corporation verses and individualist/or conservative corporation?

Clearly a Soviet-style Collective Farm would be collectivist, but Newscorp would seem to me more of a monarchy or oligarchy. What would a constitutional corporation need to have to protect individual liberty, private property, and give its citizens security?

[George Rebane]

Government does not have a monopoly in building and operating inefficient and corrupt organizations. As long argued in these pages, corporate capitalism can achieve the same level of large, lumbering, centrally controlled organisms with poor feedback mechanisms (not only from internal operations but also from their markets). The solution has always been for a large corporation to reduce risk to its bottom line by buying protection from government. No corporation grows beyond a certain size without being in cahoots with its gun-carrying government which ensures its safety through favorable regulations, tax loopholes, and outright stifling of its competition (all properly bought and paid for).

The corrupt(ible) money-seeking politician is the perfect foil for what I have often repeated as the Capitalist Dictum – the good part of capitalism is that it games the system, the bad part of capitalism is that it games the system. Therefore the goal of a benevolent and wise government is to create and enforce a system in which the good part of capitalism overwhelms the bad part.

My problem with the CPC is most likely rooted in my ignorance of how the John Lewis Partnership really works in the marketplace. Nevertheless, my overarching concern there is why other CPCs have not sprung up if the JLP has all such good attributes, and therefore presumably provides a good ROI at the level of risk it successfully manages. The Capitalist Dictum predicts that CPCs would multiply like rabbits were they really a good as they appear from a distance.

However, if we remove the corporate profit motive and encourage internal feedbacks with a generous bonus program, then combining some of the organizational and operational aspects of the CPC with the ownership structure of the NPSC may get us traction in hiring the growing population of un(der)employables and having them contribute to what society needs.

Collectivist corporations don't work. Monarchist corporations work, depending on the wisdom of the 'monarch'.

"What would a constitutional corporation need to have to protect individual liberty, private property, and give its citizens security?" I'm not sure why elevate the CPC to a level of social organism that it includes duties to provide such protections which are the historical functions of the state in which a CPC would be chartered.

[Michael Rogers]

I believe that the reason CPC have not proliferated is the capital formation problem. Why would an individual with the capital needed to start a large business ever form it as a CPC? It would be against their self interests. Why would an entrepreneur who had mortgaged the house, worked for years without pay, ever convert their business to a CPC? I didn't, and I believe passionately in their efficacy. John Lewis did, however he was a unique individual and I wonder what his kids thought of it (kind of like Buffett's and Gate's kids).

I believe that the only way to start CPCs is with large pools of capital designated specifically for that purpose where people are compensated for their efforts from the beginning and there are no contribution disparages between employees from CEO to Janitor.

It has been said that the true story of evolution is not Dog-Eat-Dog, but increasingly complex cooperative structures where freeriders are marginalized and cooperators capture the effects of their cooperation (BTW socialism and communism did not accomplish this because they allow authoritarian freeriders to take over everything). Tom Malone from MIT (http://mitworld.mit.edu/video/229) would argue that we have not done it because we never had near-zero-cost coordination tools before that tended towards making it an organizational imperative.

I think this line of thinking leads to a company with "citizenship, equal and without rank, (and) the highest station the (company) can give is to those who (work) within its borders." But those with leadership abilities lead.

[George Rebane]

Years ago before I became involved professionally with operant conditioning (Navy's marine mammal programs) I read Skinner's Walden Two wherein a society/community was formed that was much akin to what might evolve from a CPC. It was a beguiling read. But after getting into it a bit, I recall all the questions coming up that pointed to the requirement for massive amounts of altruism for such a society to work - perhaps populated by Marx's fully developed Communist Man. Well worth the read, it is a short book written after WW2 when our eyes were still full of the propaganda from the Depression and news films from the USSR showing happy peasants dancing on their collective farms after abundant harvests. The Iron Curtain had not yet fallen across Europe.

[Michael Rogers]

For me the metaphor is more like a band of Lakota Sioux living off the fat of the land but in a harsh environment with everyone doing their part and great chiefs who provide and protect their people. People ask how someone becomes an elder in a per-colombian native society and the answer is "years of service to the community". An elder is not someone smart and wise, but someone who has used those smarts and wisdom in the service of their people.

In this system the only altruism is reciprocal altruism. This is illustrated by vampire bat colonies. Vampire Bats live on blood meals. Blood meals are rare and individual bats cannot live on their own hunts. So, Bats share blood meals when they return to the cave. But freerider bats who don't hunt will kill the entire colony. They developed a sophisticated system of reciprocal altruism where if I share when I return from a hunt then I am marked as a sharer and every other bat will share with me. If I don't share then I am marked as not a sharer and no bat will share with me. It is not a one for one where if you share with me then I share with you. It is if I share with you, the colony will share with me.

The example of this in human hunter gather bands is illustrated by the hunter who brings a deer back to a starving band and says "this is my deer". That would be his last day in the band. But, if he gives his deer to the band, they dress it, the young girls gather greens and roots, grandma makes her acorn mash, the kids gather firewood, the women butcher the meat and set aside the heart and the fillet for the hunter, he goes and takes a nap in the teepee with his girl, and then wakes up and says "what's for dinner?" They then tell stories about his strength around the fire and he is revered and looked to for leadership.

Fortunately, I do not have the experiences of Fascism and Communism but I very much respect your perspective and share your revulsion for a propagandized view of the happy band I describe above.

But, I do wonder if a real modern version of this highly successful way of human economic interaction is possible. What I think the Soviet propaganda leaves out is the powerful chiefs who look to outsiders with suspicion and cagey wisdom and protect their people from the freeriders of the world -- like those who rule communist/socialist systems.

[D. King]

George,

Here is what I got back in an email.

Hi Dave,
-
-
-

My gran was (and still is) a partner (retired) at John Lewis. The system definitely worked but I think it is very different from when she was working there. She loved the partnership and had a great sense of pride in it.

Hope you have had a good weekend.

Lyndie

Not much George.

[George Rebane]

Thanks DaveK. Well, we know from a sample of one that her CPC relationship was and continues to be a good one. The intriguing puzzle is how "very different" is John Lewis today, and why the change. Perhaps MichaelR could look into that.

[Michael Rogers]

Sure. I would love to talk to (email) Gram if she is up for it. Is there a private way I could get that? I am fine with cold calling the company, but I am afraid I would not get the inside scoop. I do think that Constitutional Partnership Corporations are meant to be adaptable over time and she could simply be responding to a change in culture that leadership in the company felt was necessary to adapt to changing market imperatives (the company has been experiencing significant growth).

I am struck by the "great sense of pride" -- that seems to me the key thing we have lost.

On a side note, I would not call myself a conservative, however I am glad to return to the logical civility I have received on this site after some recent bruising from the left elsewhere.

[George Rebane]

Agreed MichaelR. And having now read several of your comments, I am intrigued as to where you place yourself in the ideological spectrum. Specifically, your allegiance to the eight tenets of what some call Rightwing belief would be of great interest. If you care to, please comment on
http://rebaneruminations.typepad.com/rebanes_ruminations/2011/11/the-views-of-a-rightwing-extremist-indictment-without-evidence.html

Also, where would you fall on the ideological field as described by the Nolan Chart?
http://rebaneruminations.typepad.com/rebanes_ruminations/2008/02/liberals-and-co.html