Equality, Participation, Transition: Essays in Honour of Branko Horvat

OA15). Outside the space considered by Ben-Ner and Jones, below the
line of 100 per cent participation in profit and capital gains, there is
another area, where employee ownership is accompanied by control in
the hands of employees individually holding a smaller share of equity
than labour – in which case the exercise of dominant control leads to
potential excess returns, right down to the expropriation of other
shareholders. This cell is not empty: it contains a large proportion of
Russian enterprises privatized in 1994–8. 4
This class of ‘below the line’, potentially exploitative enterprise is
institutionally unstable: it is likely to be ‘eaten up’ by employees distributing
its net assets among themselves; it will be refused credit and equity
capital. The type of enterprise in the top right cell, if it temporarily
existed, would be doubly institutionally unstable, first moving to this
class of ‘below the line’ potentially exploitative enterprises, then vanishing
as such for the reasons given in the previous paragraph.
An additional possibility is the utopia, or rather the ‘Agathotopia’ (etymologically
a ‘good place’) proposed by James Meade (1993). Meade’s
Agathothopian enterprise is a 100 per cent participatory enterprise with
ordinary capital-shares and temporary labour-shares for employees,
commanding equal dividends. Employees receive a dividend in lieu of
wages, and therefore the whole value added net of rentals and interest
is distributed instead of net profit. Each employee is issued, at the time
of hiring, with as many shares as would yield the going wage rate, and
thereafter throughout his/her employment gains or loses from enterprise
performance being better or worse than anticipated. By definition,
net value added is distributed according to the number of shares owned
by employees and by outsiders, thus avoiding the kind of conflict illustrated
in the previous paragraph – though there may be residual problems
in the treatment of pension rights or the possible periodical
revision of individual employee shares (Meade, 1993). The scheme has
the advantage of transforming employees into entrepreneurs – at the
cost of additional risk which therefore requires additional arrangements
such as part-time non-wage labour, or a citizenship income. In Figure
6.1 Meade’s Agathotopian enterprise corresponds to a segment of the
diagonal going from top left to bottom right, located within the bottom
right hand rectangle (not represented).
6.5 Policy implications
Mario Domenico Nuti 99
This kind of classification and accompanying reflections place employee
ownership in a more sobering light and weaken the case for public