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I usually see this argument about the utopian company which shields employees from the losses in debates. In the real world a company making losses cuts down on employees, wages, increases working hours for same pay ; all negatively affecting the employees in a desperate attempt to survive, failing which the company shuts down causing loss to all employees. They are however not sharing the increased profits with the employees when they are highly profitable, they don't hire more people than required because profits are more.

I see there is a market value that the company has to pay for labor. The additional profits are generated due to the performance of the employees, they should get a share in the profits for their contribution, the investors putting in the capital are currently taking 100% of the profits. There should be a share in this for those putting in their sweat and brains.

[nybble41]

> In the real world a company making losses cuts down on employees, wages, increases working hours for same pay…

All of that only affects future earnings. The employees' wealth (savings) is not tied up in the success of the company—they can quit at any time and go work somewhere else. Everything they've earned up to that point is theirs to keep, along with intangibles like training and job experience they've received along the way. This is their share for "putting in their sweat and brains".

For the shareholders, on the other hand, a company taking losses doesn't just impact future income. Their entire investment is at stake.

If an employee prefers equity rather than income they are free to purchase shares in the company with their earnings; as a rule, though, employees just want to put in their hours and get a steady paycheck which they can spend or invest as they please. They don't want to be forced to invest in their employer such that the prospect of their employer going bankrupt threatens both their paycheck and their savings.

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The investment of shareholders is at stake irrespective of whether they share the profit with the employees, success of the company is a different function altogether.

>For the shareholders, on the other hand, a company taking losses doesn't just impact future income. Their entire investment is at stake.

Investors who do not get more returns in the companies compared to a debt instrument will take their investments to companies which can offer better returns, that is how they should manage their risk without getting bankrupt.

There is a chart above where some companies have profit/employee close to a million dollars, intellectual property of the employees is not valued enough, value is only attributed to the capital invested , which if you look at companies which are overvalued is not the rarest commodity; employees are not a rare commodity but good employees are.

[nybble41]

> Investors who do not get more returns in the companies compared to a debt instrument will take their investments to companies which can offer better returns….

Of course, but to do that you first have to find another investor willing to take your place by buying your shares. An individual shareholder might leave but the shareholders, as a group, are just as invested in the fate of the company as before.

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I agree, the company in total loses value when it shuts down, the employees are left without any jobs causing loss of livelihood , investors are left with a loss in share value.

Employees can get another job , investors can diversify and manage their portfolio better, there usually higher risk inherent when higher growth and dividends are expected.

What I am saying is everyone is affected when a business shuts down, its not something which affects only investors, employees are also affected, but when the company has record profits in most cases it is provided exclusively to investors and no portion on the profits are shared with employees. I see salary as a way of booking the employees time, a share in profits is what they should get for how productive they are in the booked time.

[nybble41]

> Employees can get another job, investors can diversify and manage their portfolio better...

Employees can get another job after the fact. Their skills and experience are mostly transferable. I'm not saying it isn't disruptive, but they haven't lost any principal or equity, just the opportunity to sell more labor to that particular employer in the future.

For the shareholders at the time to business goes bankrupt it's too late to try to diversify. Their shares are worthless and they are out whatever they paid for them. (BTW, telling them to diversify ahead of time is equivalent to telling them not to invest as much into this company... which isn't great for the company or its employees.)

> ... no portion on the profits are shared with employees.

The employees' fair share of the profits is their salary or wages (plus performance bonuses where applicable). If they want equity they can buy it with their earnings, but in general it's a bad idea to hold too much equity in your employer. The trade-off for sharing in "record profits" is sharing in the losses when the company doesn't do as well.