You say that you like businesses but not corporations. Well, almost every business in the country, including many sole proprietorships and non-profits, are incorporated. The reason you incorporate your business is to protect your personal assets in case you get sued or the business goes under. I'm sure that my father's business was incorporated, and it was just a partnership of five guys. I remember when the amateur choir of which my mother was a member got incorporated. They had about a hundred members and, the way it was explained to me, each one of those members could have been sued if somebody fell down and hurt themselves at one of their concerts. Once they became incorporated, only the group as a whole could be sued and the individual members were held harmless.
There are lots of different categories of corporations, but I think the ones you have been dissing are the public corporations, the ones that sell common stock to the general public. When a partnership, private equity company, or family business begins to sell stock, it is said that they "go public". It's a big step that brings them into a whole new regulatory world. I think the reason most companies go public is to raise capital so that they can expand the business. Instead of just borrowing the money, they essentially sell little bits of the company, which are called "shares". Each shareholder becomes a part owner of the business, albeit a very small part. They can vote for the board of directors, but they get one vote for each share they own, and the existing board of directors already owns enough shares between them that they usually dominate the elections. Most of the shareholders don't care about that, they're just in it for the money.
When a company puts new shares up for sale, it's called an "initial public offering", although I think that most of the shares are initially bought up by dealers, not the general public. It is only from this initial sale that the company gets any money, when the shares are repeatedly traded back and forth between people, the company doesn't get a cut of that. When a company's stock goes up in price, the company does gain prestige, which might help them get a better price on their next IPO. The reason a CEO gets canned if the stock tanks is that all the board members own a lot of shares, which is essentially why they're on the board in the first place.
The shares owned by the board members, and all the other shareholders, represent their own personal assets and are not included in the accounting of the corporation's assets. When the corporation makes a profit, the board can decide to distribute some of that profit to the shareholders as dividends. Once that happens, it's not the corporation's money anymore, it's the shareholders' money, and it is taxed accordingly.
So is this the type of corporations that you believe are structurally bad? If so, what is it about their structure that you don't like? You have told me before that you are not a big fan of the stock market. Is this the reason you don't like these companies? If the stock market didn't exist, companies could still sell stock, but the buyers wouldn't have a place to re-sell their shares to other people. I suppose they could still make private deals, one at a time, but I'm not sure how that would work. Some companies, Procter & Gamble is one of them, will sell you their stock directly without going through a broker. I believe this is called "over the counter or OTC". Would you abolish that too? If companies couldn't sell shares to raise capital, they would have to borrow it, mostly from banks. Don't the banks have enough power already?
Procter & Gamble kept me out of poverty for 23 years, and Wall Street has kept me out of poverty for the last 24 years. If it wasn't for those two institutions, I would probably be a poor man today, adding one more to the ranks of poverty. Anything the government does for us is funded by money that was skimmed off the private sector economy. The more you restrict that economy, the less money will be available for skimming off.
No comments:
Post a Comment