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Unpublished Paper
VOICE WITHOUT SAY: WHY MORE CAPITALIST FIRMS ARE NOT (GENUINELY) PARTICIPATORY
ExpressO (2011)
  • Justin Schwartz
Abstract

Why are most capitalist enterprises of any size organized as authoritarian bureaucracies rather than incorporating genuinely employee participation that would give the workers real authority? Even firms with employee participation programs leave virtually all decision making power in the hands of management. The standard answer is that hierarchy is more economically efficient than any sort of genuine participation, so that participatory firms would be less productive or efficient and lose out to more traditional competitors. This answer is indefensible. After surveying the history, legal status, and varieties of employee participation, I examine and reject as question-begging the argument that the rarity of genuine participatory management itself shows that it is inefficient. I then refute two transaction cost theories presented by Stephen Bainbridge, first that hierarchy is a superior way to get information to decision makers, and second that it is necessary to reduce shirking. In fact the empirical evidence shows that employee participation even as it exists significantly enhances productivity, and most strongly when it approximate features that would give the employees “say” as well as “voice,” that is, real authority in the enterprise. This, however, leaves us with the puzzle about why every firm is not genuinely participatory. I offer an explanation based in the fact that the costs and benefits of participation affect the owners and the employees differently. The owners of the enterprise are unlikely to profit from the sort of decisions that employees would be likely to make if they had the power to do so, even if these enhanced productivity and by implication profitability. Greater profits for the firm would often mean less profits for them. Accordingly, they have a strong incentive to resist genuine employee participation.

Keywords
  • Employee Participation,
  • Participatory Managaement,
  • Employee Involvement,
  • Business Organizations,
  • Law and Economics
Disciplines
Publication Date
August 11, 2011
Citation Information
Justin Schwartz. "VOICE WITHOUT SAY: WHY MORE CAPITALIST FIRMS ARE NOT (GENUINELY) PARTICIPATORY" ExpressO (2011)
Available at: http://works.bepress.com/justin_schwartz/6/