I think you're right in one regard, it will induce a race to the bottom amongst larger companies going this way.

Quality is going to decrease over time. Lay offs mean the loss of institutional knowledge, team experience, internal quality standards, business relationships, inter-team relationships etc. etc. etc. that let them get things done. The new teams will be riding any technical capital left behind by the old guard for a while but I'll predict it'll run into problems by the 5yr mark. Costs will skyrocket as projects take more time, work processes have to be rebuilt, relationships start from scratch, etc.

In terms of the bottom line, it looks good now, but they're going to be paying for it later. Either in higher costs to the contractors to fulfill projects OR paying consultants and internal teams absurd money to fix technical debt. It will happen. It's cost shifting.

Edit: The other thing I forgot to add is loss of ownership. Shifting IT/development staff to contractors is going to decrease the sense of ownership in the project which means the level of care and concern about the success of the project are going to decline. Yes, it's an intangible and an important one. If I own something and feel like my work on it is necessary for success, I'll put in the work to do it right and set it up for success. Contractors will build to the contract and everything else is an add-on that costs more. Want that plugin for a new feature an internal dev would have built in as run of course because they see a future need? That'll cost you another 4 weeks of contract developer time because it wasn't in scope of contract.

> Shifting IT/development staff to contractors is going to decrease the sense of ownership in the project which means the level of care and concern about the success of the project are going to decline

I could not agree more. I have worked with so many big companies that have outsourced their IT and tech (part of the reason I was doing work there in the first place) and the lack of empathy and general apathy by these providers has always been a huge reason for overruns and delays.

There's no accountability, so a mess up doesn't get anyone scared for their job. If the worker is offsite it means the work goes through their ticket system and you just wait for it to get some- but it's probably going to get bounced back three or four times because the person didn't read the ticket. A perfect example is "we need a new database schema deployed to a dev database instance- here's the instance name we need it deployed to, here's the SQL script to be run, and here are the user permissions we need."

Ticket gets bounced back: "What instance is this supposed to be deployed to?" facepalm

On top of that, most the companies that come in, provide the bare minimum of resources, so that guy that's not getting paid enough to give a shit has too much work on his plate to keep up with it anyways.

Keep in mind the extra you pay for contractors isn't actually going to contractors in question. It goes to office rental, accountant, sales team, internal HR and other crap. Not to mention the contractors in question will be hassled to spend time estimating future project scopes and sometimes help out on other projects and etc. So yeah, if tech is important to you and you don't need specialized skill-sets that's rare, contracting out is always pretty fucking stupid.

The game isn't producing working projects, the game is getting so embedded you're there forever and then you nickel and dime for every little thing. Need a 30 second change of color on the HTML bar to fix accessibility? That's a week of dev time. Not only that, as the Contracting Corp, you lose control over the quality of candidate being hired to work on your projects.

And which investor, when put before the choice of supplying capital to a C-corp or a B-corp, will willingly choose the entity that admits having his ROI as a lower priority than the other, all other things being equal ?

By this logic, we could see B-corps in niches where capital is not a strategic advantage. The search for these niches is left as an exercise for the reader.

There are some funds which target such investors. For example, the Parnassus Endeavor fund:

"The Parnassus Endeavor Fund normally invests at least 80% of its net assets(plus borrowings for investment purposes) in companies believed by the Fund’s investment adviser (Adviser) to provide good workplaces for their employees. Companies with good workplaces usually are able to recruit and retain better employees, and perform at a higher level than competitors in terms of innovation, productivity, customer loyalty and profitability. While no company is perfect, the Adviser makes a judgment as to which companies have good workplaces based on factors such as respectful and fair treatment of employees, employee satisfaction and engagement, pay and benefits, family-friendly policies, and support for volunteerism and philanthropy."

Social investing as well as religious funds also put a higher priority on certain ethical criteria rather than overall profitability. The motive for investing in these funds depends on what one recognizes as their highest end.

The public absolutely would invest if it meant these B-corp's have solid, steady, long term focused growth.

or C-corps taxes more and international tax avoidance loopholes are closed. But i guess both of these would be hard to make happen

The investor who is more concerned with the public good than solely her own ROI.

Amazon does this all the time, and yet their stock is doing ok.

An investor who's looking beyond the next quarter will look more at a company than just ROI.

> This is a race to the bottom. Most companies today prioritize the satisfaction of the stakeholders as follows:

> C-Level Management->Shareholders->Customers->Employees

That's not really true. In the end the shareholders have all the clout. Management can go against shareholder interests for a time, to the extent they can hide what they're doing, but the interests of she shareholders will always be paramount in the end. I'm not sure what you're expecting. Yes, management looks after its own interests.

But so do employees. Said nobody ever to himself: "Self, there was a big flood in Thailand this year and the company lost a lot of money, so I'll take a lower salary than my skill set demands until the company is back on its feet. Otherwise it wouldn't be fair to the shareholders."

You under-appreciate how much control a united, semi-competent C-suite can have over a business where shares are largely held by passive institutional investors. As long as the executives don't run it into the ground they can do pretty much whatever they want. Stock based compensation over a long (5-10 years) time horizon seems to be the best way to align incentives, but is under-utilized. I wouldn't have believed this until I experienced it first hand.

In my case I've seen executives do far, far worse. Shareholder apathy at its finest... How about having a string of continuous losses for over 6 years taking the valuation of a 250 million dollar company to practically worthless. Was management changed by the shareholders? No. Did the shareholders care if the company wasn't making a profit for so long? Apparently not.

The power struggle between C-Level and shareholders is up for debate. And keep in mind that an executive needs to fool the board just long enough to get what he wants. So even if they eventually wise up, it may be too late.

As for the relative power of consumers/employees versus shareholders/executives - the former are disparate and disorganized and can do little other than vote with their feet (a pretty severe, last-resort option). The latter are few in number, can concentrate their force and get their way more quickly and efficiently.

This is why there needs to be public policies that tilt the playing field back in favor of employees and customers.

Honestly, I think employees say that to themselves all the time. Particularly if you replace "shareholders" with "my team members" or an amorphous "the company."

Well, that's sort of my point, isn't it? No employee gives a single shit about a) management or b) shareholders. They care about themselves and other people in their position.

And it all works, because it doesn't matter if you don't care about the people with whom you're doing business. That's the beauty of the system.

+1

I'm a proponent of public benefit corporations. I think Kickstarter became one last year. There's also Just Capital, a nonprofit organization created by Paul Tudor Jones II with Deepak Chopra. They have a metric to measure and rank benefit corps.