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 Originally Posted by CoccoBill
To continue, profit motivates only those who receive them. In a big company that's typically the shareholders and some execs, not the employees. There might be some reward system in place that benefits all employees, but most of the time there's no linear correlation between company performance and employee bonuses. More typical from my experience is that if the company performs well, you get whatever bonus percentage of your annual salary you're entitled to (provided you've also met your personal targets), and if the company performs poorly, no one gets anything. Yet it's the employees who have the most effect on the company's performance [citation missing], the shareholders who get most of the profits have none. I'm starting to think profits aren't that effective an incentive in many cases. For a mom and pops sure, where the employees are the "shareholders", but where are those nowadays, and how big part of the economy are they?
The employees are driven by profits too (their own wages). I don't mean this in that they are driven by the profits of the company (they're not), but in that they are themselves akin to mini-companies. Just like a company sells a good or service to a consumer for profit, a laborer sells his service to the consumer of labor (employers/owners).
Compensation matches well with skills and risk. Shareholders get more of the rewards of good times because they take on the risk of bad times. Higher up work gets paid more because it requires rarer skill sets.
If I was questioning the idea of profits, I wouldn't want to go this route. The current system rewards pretty closely to the real risks and real skills that different parties have.
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