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Re-architecting Companies

Updated: Feb 14, 2020

It’s time to “fix” the broken leadership and structures in public companies. The recurring theme of promise from a few people at the top who are inserted as saviors, visionaries, and leaders are recruited and compensated with the sole trust to drive profitability for shareholders. The trust is to the shareholders above all else, so we should not be surprised by the outrageous compensation (50x — 250x of the lowest-paid employee)and parachutes are provided to these employees. When these leaders fail, and many do, the reasoning and explanations in annual reports and presentations are often very complex and carefully positioned.

Yet, the burden of failure all too often falls on the “other” employees. The case of WeWork (ironies aside) is another shining example of how inequity plays out in work and society. If we want to change the growing disparity of wealth in our society, then we need to place the trust in all the employees not just the ones at the top. The only way to demonstrate that trust is to democratize the accountability, trust, and compensation. Hierarchical structures are designed to consolidate power, control, and wealth. Time to change the structure if we are going to fix the problems. The best way to do this is to establish a flattened structure where the compensation disparity between the lowest and highest-paid employee is capped at 10x. There may be a few exceptions, but the goal is to build a resilient structure that rewards (all) the employees who are responsible for doing the work that creates value for all stakeholders (beyond shareholders).

If the company does well, then all of the employees share equally in the wealth, based on the structure. The structure dictates the wealth distribution not the monarchy at the top. The compensation to the shareholders is provided with the residual. Accountability and trust are distributed across the structure, which limits exposure and encourages leadership and innovation. This is all doable and there are many examples to draw upon. It is also the only peaceful way to restore inequity by distributing wealth proactively instead of trying to redistribute wealth through taxation, which is a reactive model that already has an enormous moat of laws and experts designed to minimize those efforts.

The concepts around capitalism still work well, but it’s time to change the structures used to drive capitalism to ensure the wealth created is more evenly distributed. This is how you create flow-based economics instead of relying on trickle-down economics, which is still an unproven theory.


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