It’s why I think worker-owned coops should be more common. Research shows that they’re a more resilient business model than hierarchical businesses. I think it’s because they can largely avoid the principle-agent problem, wherein executives and investors act on behalf of the company, but their personal incentives do not necessarily align with the company’s. For example, a CEO has a vested interest in pumping up profitability in the short term, even if it’s by slashing R&D funding and alienating customers long-term, so they can get nice numbers to pad their resumé. Likewise, investors just want their investment back.
With a coop, overall control of the company’s decisions is guided more by the long-term health of the company, as that’s what is best for the workers. It aligns incentives, avoiding the perverse incentives that cause hierarchical businesses to make unsustainable, short-term business decisions.
It’s why I think worker-owned coops should be more common. Research shows that they’re a more resilient business model than hierarchical businesses. I think it’s because they can largely avoid the principle-agent problem, wherein executives and investors act on behalf of the company, but their personal incentives do not necessarily align with the company’s. For example, a CEO has a vested interest in pumping up profitability in the short term, even if it’s by slashing R&D funding and alienating customers long-term, so they can get nice numbers to pad their resumé. Likewise, investors just want their investment back.
With a coop, overall control of the company’s decisions is guided more by the long-term health of the company, as that’s what is best for the workers. It aligns incentives, avoiding the perverse incentives that cause hierarchical businesses to make unsustainable, short-term business decisions.