Book Cover

Democratic
Capitalism,  The Way to a World of Peace and Plenty


CCDC #151

Worker ownership has grown in many ways because properly organized it improves productivity.

It can be introduced in all companies simply by providing the opportunity to buy ownership through payroll deductions. To succeed the culture must be one of trust and cooperation with capital and labor synergistic not competitive. The workers' share in improved productivity can be invested in improved health and education.but they are also given the opportunity for self development. This is the long-sought "humane capitalism."

Ray

 

Excerpt from CHAPTER 10
The Way to a World of Peace and Plenty

Ever since Karl Marx (1818-1883), “worker ownership” has had a threatening sound. Those with wealth thought that it meant: “We have it, and the masses are trying to take it away.” The worker ownership that I propose throughout this book is different from the Marxist revolutionary approach that spawned the fears of the wealthy. In democratic capitalism, no one takes anything away from anyone else; rather, the workers buy ownership with their own money, and they share in additional ownership accruing from the improved performance that they have helped to build. How can workers with tight budgets buy ownership? It is surprising how fast workers can build ownership from a modest weekly deduction from their pay, especially when the company adds more stock based on improved performance. From the beginning, workers feel and act like owners as long as the structure is decentralized and the culture is one of trust and cooperation. During ten years of Care and Share, the associates at ADT purchased and earned ownership of 13% of the company through their payroll deductions and the profit-sharing plan. Their ownership percentage would have continued to climb, had ADT remained an independent company.

My experience included an education in the corruptions of capitalism, for I was running ADT during the time when ultra-capitalism was growing to dominate the economy. I observed that Wall Street during the 1970s was making a profound change from providing long-term advisory services to transactional, basing the price of their services on a percentage of the deals they negotiated. Inevitably the number of deals exploded and rained money on all involved. This change on Wall Street initiated the compensation feeding frenzy that eventually infected the whole system.

During this time, the rush of hundreds of billions of dollars from ERISA pension funding (see chapter 7) gave the stock market new power to reward or punish CEOs, based on small changes in the quarterly earnings of their companies. Many CEOs learned how to parlay stock options into fortunes, many others were reluctantly forced to abandon long-range plans (see chapter 8). I was dismayed that the corporate mission to serve the broad constituency of stakeholders was ridiculed by many, including the financial press and Business Schools. The new mantra had become “shareholder value,” a focus that ignored the growing excesses that, in time, destroyed shareholder value. The “American Model” that was flaunted to the world as the new, improved economic paradigm included the philosophy that “greed is good.” This emergent ultra-capitalism was a contradiction of democratic capitalism, the management philosophy that I had learned and practiced from the time I was a young plant manager until I retired as a 62-year-old CEO.

In retrospect, I judge my management performance in terms of financial measurements to have been successful. ADT had a total market value of $97 million at the beginning of my term; by the end of my term, shareholders had received about $1 billion in dividends and cash for their stock. I judge the company’s overall performance, however, to have been well below its potential. The reason for this, besides my own limitations, is that changing any corporate culture is a long process. Most of the managers were educated in an environment that gave tacit approval of the command-and-control style and no attention to democratic capitalism as a coherent system. Leaders have to be retrained away from the top-down management style, and away from the mercantilist philosophy that profits go up as wages and benefits go down, instead of profits going up as people are motivated to contribute. I found that managers are quick to agree philosophically with democratic capitalism, but, under stress, some will revert to the traditional style. Changing the organizational culture is a delicate process because months of slow progress can be wiped out quickly by the actions of a single supervisor who demeans people.

Many who have never had the experience of changing an environment to release the latent power of people, might think that the steps necessary are too obvious for comment, and the benefits exaggerated. More cynical observers would describe them as warm and fuzzy concepts with no place in the macho world of Social Darwinism, creative destruction, and downsizing. Only from experience, it seems, can one appreciate the magnitude of the human power that is released under the right circumstances. Rather than being anachronisms, these concepts have new currency in the Information Age because the release of the cognitive power upon which Information Age industries depend requires a democratic capitalist culture.


Ray CareyRay Carey

Ray Carey learned through managing companies for 33 years how to change the work culture to provide employees with their best opportunities to develop and contribute. This experience began as a 28 year old plant manager and later president of an electric motor company, and concluded with eighteen years as president , chairman, and CEO of ADT, Inc.

See Carey's autobiography of his work career in chapter two of his first book,

Democratic Capitalism, The Way to a World of Peace and Plenty.

For more information about Ray Carey and his advocacy of democratic capitalism, visit the pages of this website.