Pre distribution or Redistribution?Not mutually exclusive
Does the Predistribution Initiative Take a Stance on Redistribution?
We recognize that much of our modern society is built on historical inequities that place today’s actors in the economy on unequal footing. Taxes, philanthropy, and impact investing can help level the playing field for historically disadvantaged communities and people (e.g. due to slavery, racism, forced land acquisition, etc). Taxes in particular are also critical for provision of public services and resources. While the Predistribution Initiative is supportive of efforts to advance certain redistribution strategies, it is not a focus on our work.
Many assume that the best way to address high private equity compensation is to tax carried interest as ordinary income versus capital gains. However, this redistribution of earnings does not address whether workers are adequately paid in the first place.
Importantly, the Predistribution Initiative is not a call for a redistribution of wealth - nor an argument against it. Rather, it recognizes that there are currently inefficiencies in labor and capital markets and that investors are uniquely positioned to more fairly compensate people on the basis of the value they actually create, from the portfolio company worker, to middle management, to senior management, to the professionals working for the fund manager, to the asset owner.
Rather than only redistributing wealth through taxes or philanthropy, people should also be more adequately compensated for their contributions to a company’s success in the first place, putting them in a place of power versus dependency on social safety nets.
The initiative seeks to develop empirical and transparent methodologies to inform improved compensation structures, while not ignoring exogenous factors such as market rates for labor, localized cost of living for various stakeholders, etc.