Human Capital Is Not A Piece of Property

by Jay Deragon on 04/29/2013

we-the-corporations02-e1294670618870Much of the mental models, and subsequent behaviors, of modern corporations are actual left over from the days of feudalism. This is how leaders of corporations (lords) came to believe employees (vassals) were given jobs (fiefs) but the corporation owned the person(s) skills and knowledge that performed the work.

Feudalism describes a set of reciprocal legal and military obligations among the warrior nobility, revolving around the three key concepts of lordsvassals and fiefs. A lord was in broad terms a noble who held land, a vassal was a person who was granted possession of the land by the lord, and the land was known as a fief. In exchange for the use of the fief and the protection of the lord, the vassal would provide some sort of service to the lord.

Marjorie Kelly writes in her book “The Divine Right of Capital”“Employees-as-property is a troubling concept. But evidence of it is wide-spread— as in the commonplace observation that “employees are our greatest assets.” Assets, of course, are something one owns.”

“The fiction that outsiders can own a company, which is nothing but a network of human relationships, is a house of cards. Employees themselves are the cards, willingly holding the place together, even as stockholders walk off with the wealth that the employees create. How long this will be sustainable remains to be seen. But for the time being, employees remain hypnotized, believing themselves powerless, and accepting (Shazam) that stockholders have sole and despotic dominion. We accept this because we operate from the unconscious assumption that corporations are objects, not human communities. And if they’re objects— akin to feudal estates— then they’re something outsiders can own, and the humans working there are simply part of the property. Either you own property or you become property; there is nothing else in a property-based world.” 

From a Property Based to a Value Based World

Over the last 25 years the valuations of public corporations have shifted from the tangible assets to the intangible assets. Today the intangibles represent anywhere from 65% – 85% of the value. The intangibles are largely things labeled as Goodwill, IP and Patents.   All of which originated from Human and Relationship Capital created from the minds and interactions of people. The people were guided by Strategic Capital (purpose) and supported by Structural Capital (systems) and all of it was merely contained in a wrapper called the corporation.

The stockholders provided the initial economic capital to create and grow the corporation but the value appreciations over time are created from the intangible capital initiated and contributed by the people; employees, suppliers and customers. Yet people are viewed as an expense needing to be reduced or squeezed for more value while shareholders are viewed as “lords” to be given the majority of the economic value above and beyond the initial value they put in.

Some may say this represents the free market capitalist system. Others may say this fiction was built on a house of cards that has been perpetuated by strong mental models and lies since the days of Feudalism.

What say you?


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