Pay Increases LO5649
Thu, 15 Feb 1996 12:38:15 -0500

Replying to LO5600 --

How do we get stockholders to think more like employees? (Now that we've
gotten employees to think more like stockholders?)

Drucker has reported on a fascinating trend that seems to rarely be
referenced in disucssions about this tension between stockholder and
employee interests. Employees (via pension plans, IRAs, etc.) ARE the
majority stockholders today. And their portion of stocks is growing.

This results in some ironic situations. I worked at General Dynamics when
so many folks were getting laid off at the same time that their stock was
soaring in value. Talk about mixed feelings!

Deming warned about sub-optimization -- doing what is best for a part at
the expense of the whole. I predict that pension funds will make a shift
away from suboptimization within the next three years. Consider this

Currently, pension funds are managed to maximize return on investment.
Fund managers buy and sell with the hope of big returns. But what if
pension funds are actually just a tool that can be used to maximize
employees' lifetime incomes? California's state pension fund has
exercised its weight and actually created changes in policies at big
companies. If all pension funds were to use their huge influence on
companies to work out profitable solutions that increased salaries and the
number of employees (something illustrated through Deming's chain
reaction), the pension funds would actually increase their size through a
mechanism other than returns. (More employees making more money means
larger pension fund contributions.)

The result? Optimization of employees' lifetime income (of which
retirement income would be just a piece) rather than optimization of
employees' retirement income (which, sadly, we seem headed towards through
a combination of higher stock returns AND earlier termination of careers).

Just a thought ...

-Ron Davison,
San Diego Deming User Group Newsletter Editor and video producer of
"A Change in Thinking: Systems Thinking, Learning, & Intellectual Capital"
(available through ETC)


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