Online Discussion of ISSS paper 2002-082, "Some Systemic Implications of Common Ownership: A Shift of the Business Perspective for the 21st Century?", Sylvia Brown

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(7/7/02 2:22:09 pm)
BROWN 2002-082 Some Systemic Implications of Common Ownershi


This paper is an early-stage attempt to map out and understand some of the ramifications of Common Ownership financial structures in business enterprises. Case study material is included, to illustrate some of the systemic properties discussed. Mutuality in the conduct of business exists for a variety of reasons and in many different forms. For example, at one extreme, it may be adopted only as a "last resort". In such cases, arguments for common ownership could rest upon systemic environmental pressures that might have caused it to emerge.

This paper's main topic, however, is not this but Common Ownership as an ethical choice, located in a field of other options. Its main thesis is that ethical Common Ownership Companies (C.O.C.s) are viable alternatives to Traditional models of organisation, i.e. hierarchical and capitalist enterprises that act as if they believe in Neo-Classical economic theories. The discussion explores the proposition that the complexity that C.O.Cs must manage is composed differently from the complexity that most Traditional companies apprehend. There are additional elements to be monitored and managed, both internally and externally, some of which are consequent on the behaviour of the mainstream majority. Conversely, there are some elements of complexity faced by the mainstream that simply do not arise for ethical C.O.C.s.

Consequently, the set of challenges that arise for C.O.C.s also must be managed differently. For example, ethical dimensions of practical challenges will be addressed, rather than ignored or "fudged". A high system level question illustrating this additional complexity for ethical C.O.C.s is how the ethical principles of founding members can be extended into evolving business structures, or even if they should be. I see the main challenge for ethically-driven businesses in the 21st Century is how to be successful and profitable and remain within their founding ethical principles. The corollary of this is the further question, whether it is possible to make ethical principles a higher priority decision rule than remaining viable, in extremis. Since examples can be found, the answer is "Yes". Some of the challenges at other system levels are reviewed, before a summary of what the mainstream might learn from C.OCs.

(7/28/02 8:54:54 am)
Re: BROWN 2002-082 Some Systemic Implications of Common Owne

Key insights I got from the paper:
Common ownership companies (COCs) are viable providing products and services in niches not well-served by the more traditional capitalist enterprises (i.e. capital provided through stock market equity, organizationally hierarchical).

How might I apply these concepts:
* Although the orientation in this paper is largely ethical, I'm interested in organizational forms that present an alternative to hierarchy.

Additional ideas I might suggest to the author.
In this paper, (financial) ownership structure and organizational structure (for coordination) have been mixed together. I would suggest separating the two as separate ideas. In practice, the two may prove to be related, but I'm not yet convinced that they are.

A common (financial) ownership approach in financing has been used for centuries as partnerships (e.g. when two brothers inherit the business of a father). Services companies (e.g. accounting firms, law firms) have often been set up a partnership arrangements, where junior members work their way up to the opportunity of sharing in profits for the enterprise as a whole. Cooperative arrangements are also interesting (e.g. Mountain Equipment Co-op in Canada, or building properties in New York City). The financing of the modern corporation evolved as large numbers of investors could participate in companies, with limited liabilities on their equity. Individuals interested in providing a social function may still need more seed capital than they have amongst themselves (as principals).

A common (non-hierarchical) organizational structure may be appropriate in cultures where individuals are more accustomed to flatter or cellular forms (e.g. less paternalistic / maternalistic structures with more critical thinking skills). In addition, knowledge work causes command-and-control to break down since inspection can not be effectively conducted by supervisors.

* Should ethics (related to values) be separated from function?
Ethical considerations may introduce additional supersystems to which the business enterprise may choose to engage. However, could we be leaning too far in the "other direction" if workers just want to do a "9 to 5" routine, and aren't interested in taking greater accountability or risk? From a customer perspective, is the same result produced?

* Will COCs scale?
Somehow, the impression I get from the example cited are enterprises focused on smaller interests. From an economic perspective, firms involved in an oligopolistic structure still would tend to serve less than the full potential market to sustain profitability (e.g. a price above perfect competition with a quantity less than where marginal cost = margin revenue). Would COCs tend to become bureaucratic, and just like the traditional firms we criticize, as they grow to a similar size?


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