Reynolds Tobacco Company and Its Legendary Employee Stock Ownership Plan

So different is the situation today: my company recently cut the 15% discounted stock purchase plan from 10% of pay to 5%. (The general direct purchase program does not have attractive terms at all) The vast majority of my coworkers who participate in the plan choose to immediately dump the stock purchased. Then again, it's hard to blame their low faith in the stock considering that many of them had underwater options expire.

At the height of the panic, when corporations cut their 401(k) matching plans and their discount stock programs, I was infuriated. I still consider it one of the greatest betrayals of all time. if I had a management working for me and they considered that an acceptable form of saving money, without first slashing their salaries in half, I'd fire them on the spot.

I think discounted stock programs are a great way to reward employees (of course, if you work for a terrible business, you wouldn't want to own the stock at any price). I am sad to see they aren't as popular as they once were. I think it should be mandatory for all long-term employees in upper management to hold a certain percentage of their base salary in business ownership. It aligns interests with outside shareholders.

Hey Joshua. Sorry I haven't commented in a while, midterms at school were killer, forcing me to catch up on work (like you, I'm the type of person who skips class but ends up spending that time in the library, but unfortunately, that makes preparing for an exam a pain in the rear). Thanks so much for answering the WalMart ethics post, and I can't believe you wrote about the economics of the Monopoly Promotion- that was going to be my next question.

A couple things-

I’m curious to see whether you agree with my assessment on this or not. Do you think that you ever oversimplify the ease of social mobility and financial success? I think that if you’re at least mildly intelligent, hard working, and have a knack for perseverance, your advice is excellent, even life-changing. But I think about some of the “characters” in my life that I know- the girl trying to raise four kids under the age of six, a guy with a gun tattooed across the top of his hand (try interviewing with that), and some people who, after I hear them talk in class, are a couple cocoa puffs short of a full bowl, if you catch my drift. I guess what I’m getting at is this- it’s really easy to run a business into the ground, make god awful investments (Countrywide probably would have sounded like a legit investment to me a decade ago, if I was old enough to be into investing then), and there are a lot of jobs that are simply of the dead-end variety, but you may not necessarily see that at the time. Just something to consider, I guess.

I just reread your Christ view/biblical worldview post, and I was wondering what your thoughts were on how literal one ought to interpret the bible. I certainly understand that many biblical statement are meant to be taken in a symbolic context, but how should we approach concrete declarations such as when the bible says that Goliath was six cubits tall (9 feet), or that Methusalah lived to be 969 years old. I mean, those are specific, concrete statements in the bible, but it seems to violate common sense and reason to believe them. I mean, it’s hard to think of a more authoritative text than the bible, and if there is no direct contradiction that exists to disprove a biblical statement such as that, it seems hard to justify denying Goliath’s height or Methusalah’s age without sounding like a cafeteria catholic. If the bible truly is God’s divinely inspired word to us, it seems hard that there would be parts where he would lead us astray, but I doubt I can accept that Methusalah was kicking around for a large portion of a millenium. What do you think, or at least, how do you approach understanding something like this?
Along these lines, do you think it’s possible for a rich man to get into heaven? I mean, we do have a tendency to explain away the most difficult aspects of Christ’s teachings, but he does very clearly outline the difficulty facing a rich man’s quest for eternal salvation. Given that eternal salvation is kind of a really big deal, how would you justify extreme wealth? Is living in luxury excusable? Jesus showed very little appreciation for the modern equivalents of people who chill in yachts and dine in five-star restaurants, but at the same time, I can’t see Him punishing good people who believein Christ that made intelligent decisions and want to reap some of the rewards of their delayed gratification and prudence, because those are biblical virtues as well. It’s hard to find an honest answer anywhere to this question, because people have such an agenda in answering it- it’s either rich people trying to explain why they won’t be damned, or social workers calling out the rich to get them to give more to their organizations, and I don’t think I have ever read an unbiased answer to the ultimate destiny of the rich man. How would you proceed in reaching an opinion on this one?

And here’s another out-there question for you, regarding natural law. And basically it boils down to this- in the state of nature, do you think that a man could willingly put himself into slavery? Of course, the question then becomes, what would make a man do such a thing? So here’s the scenario I have come up with. Let’s say you’re in the state of Wyoming with your family, and there is absolutely no one else in the state, except for one household, where the owner possesses both food and water. You, obviously, do not want your family to starve. So you approach the man, and he says he will feed you and your family, on the condition that you become his slave as long as you need food. Should you steal from the man, or become his slave?

Here’s how I would answer the question- the most moral thing to do would be to become the slave, since you are both willingly exercising your rights- you are a consenting adult, fully aware of the consequences, and you entered into a contract. Who possibly has the right to tell you otherwise? However, if I were in that situation, I’d probably steal food and make a run of it- slavery is so anathema to human nature, and I would not feel any guilt stealing from someone who wanted to enslave me, although I certainly never have the right to steal the property of my fellow man. What do you think, Joshua?

I guess I better end on a financial-related note. Are Class A shares still illegal? They sound like such an awesome way to wrestle control away from Wall Street and put ownership in the hands of the true producers and those who have the best long-term interests of the company, I don’t know why you would ban them. I’m hoping to read Barbarians at the Gate in the next week, but I hate reading about the destruction of what should be feel-good business stories (oh hey, Suntrust, good point, why own the most successful beverage company with the greatest moat ever when you can bolster tier-one capital!)

All right, well hopefully, that post was enough penance for my lack of comments lately. Enjoy the rest of your weekend Joshua!

I responded to your question about social mobility here: http://www.joshuakennon.com/social-mobility-in-the-united-states/

Class A shares were never illegal, there was a problem with how the taxes were structured in the case of R.J. Reynolds. Berkshire Hathaway, Washington Post, and a host of other companies have multiple class share capitalization structures. The Graham family owns all of the Class A shares of Washington Post, giving them the power to control the Board of Directors regardless of how much control the family has in terms of the regular Class B common stocks. This was done to protect editorial control. Comcast also has an interesting class structure.

On the Bible? Literal interpretation can't be possible. Take Noah's flood. We know that the world was wiped out around that time from a huge flood with most of the major religions recording the event. There are tribes in Africa that talked about their dragon god breathing fire into the ocean and then causing floods and rains. At the bottom of the Indian ocean, there is a crater where a meteor hit around this time that would have obliterated so much sea water it would have caused massive tsunamis and months worth of rain. It would have flooded all the way up to Europe, Africa and parts of Asia. Yet, the North American Indians and South American peoples would have been blessedly oblivious to the whole thing. Genesis clearly states the whole world was destroyed and only Noah and his family survived. That clearly isn't possible because the folks in South America didn't miss a beat. So Noah's story was correct from their perspective - they didn't even know the other side of the world existed! Their entire life, everything they had ever known, and the entire world they had experienced was flooded and destroyed. That very fact means that it cannot be literal. We KNOW it didn't destroy the whole world. We can even look at DNA evidence and see that we all came from seven "mothers" a few thousand years ago. We could not have all descended from Noah. I chalk it up to man writing as best he knew at the time.

As for the morality of self-slavery? I'd like to say I'd be better, but I'd do exactly what you'd do. Screw the servitude, I'd steal the bread and make a run for it.

I'm reading about Bloomberg's latest efforts to ban us from even seeing tobacco on shelves in New York...and I can't help but wonder, do you think there's going to be a lot of pain when the tobacco industry eventually collapses? Altria, from my point of view, is one of those stocks like Berkshire Hathaway where investors have considerable net worth in the company. I can't help but wonder if a lot of investors are going to get clobbered down the line.