Author states that Silicon Valley corporate structures are more egalitarian when measured against traditional firms. Author attributes this to a more progressive, 'stakeholder' culture in SV.
Question: human capital is disproportionately more important to building value in the tech sector than it is in the broader economy (think mines, manufacturing etc). Isn't it more likely that a more equitable equity split is a pre-requisite for success in SV as opposed to being a consequence of it?
This a good point. Investment banks also generally have a very high percentage of employee ownership (50%+) because so much of their value is their employee base.
It's not quite apples to apples. Bankers get paid way more (so they sell off less of their stock) and they are also often paid in RSUs or other forms of stock comp that can't be sold for several years. Tech workers are generally paid with stock that vests each year, and if they're smart they'll sell that down immediately (as they still generally have lots of future stock they're still exposed on, from a portfolio perspective.)
I believe the stakeholder culture is because tech companies often have the potential for rapid growth. For example, a barbershop's capital is mostly human, but there isn't a big chance it will IPO. This means the best barbers don't have much incentive to choose their barbershop based on equity in the compensation package.
Question: human capital is disproportionately more important to building value in the tech sector than it is in the broader economy (think mines, manufacturing etc). Isn't it more likely that a more equitable equity split is a pre-requisite for success in SV as opposed to being a consequence of it?