Shareholder: Difference between revisions
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{{g}}The holder for the time being of a [[share]] in the equity of a company; a part owner of a corporate enterprise. Usually, shares are issued in [[registered form]] (as opposed to [[bearer security|bearer]] form), because it is sort of important to know who — you know — ''owns the goddamn company''. Whereas your [[creditors]], on the other hand — could you really give a fig about them? Well, obviously you could, but as a general category, when you have issued that indebtedness in the form of [[Bearer instrument|freely transferable]] [[debt securities]], it is that fact that ''someone'' holds them that mainly concerns you, rather than precisely ''who''. | {{g}}The holder for the time being of a [[share]] in the equity of a company; a part owner of a corporate enterprise. Usually, shares are issued in [[registered form]] (as opposed to [[bearer security|bearer]] form), because it is sort of important to know who — you know — ''owns the goddamn company''. Whereas your [[creditors]], on the other hand — could you really give a fig about them? Well, obviously you could, but as a general category, when you have issued that indebtedness in the form of [[Bearer instrument|freely transferable]] [[debt securities]], it is that fact that ''someone'' holds them that mainly concerns you, rather than precisely ''who''. | ||
Once upon a time, not terribly long ago, the shareholder was an opaque yet sacred being, somewhat divine, to whose improving ends everyone engaged in the company’s operation twitched their every last fibre. | Once upon a time, not terribly long ago, the shareholder was an opaque yet sacred being, somewhat divine, to whose improving ends everyone engaged in the company’s operation twitched their every last fibre. This will to shareholder return sprang from the brow of Adam Smith himself, and his invisible hand: | ||
{{quote|“...Though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements...They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species”}} | |||
Performance measurement was simple: the shareholders’ interest propelled the machine and that interest could be measured in a single dimension: earnings, before interest, taxes, depreciation, and amortisation. Nothing else mattered, and this even put a gate on the extent to which the company’s directors, officers, servants and agents could let their [[agency problem|conflicting personal interests]] colour their pursuit of this noble, singular goal. You cannot hide from profit after tax. | |||
But we live in a post-millennial world. Corporations are venal, selfish things, riven with bias, discrimination; a product of the West’s colonial history of oppression and wanton marginalisation. [[Adam Smith]], though a vigorous opponent of slavery, back in 1763, is in danger of being cancelled.<ref>https://www.nationalreview.com/2021/03/cancel-culture-stalks-adam-smith-an-ardent-foe-of-slavery/</ref> | |||
In place of shareholder capitalism, we see [[stakeholder capitalism]]. This asks corporations to oriented themselves to serve not just their shareholders, but ''all'' their “stakeholders” their customers, suppliers, employees, shareholders, the community, the environment, and the distantly marginalised who suffer invisibly under the awful externalities of industry while shareholders bask in the fruits of the pursuit of profit. | |||
A corporation is bound to increase long-term value for all, and must not maximise shareholder profits value at the expense of other stakeholders. | |||
This view seems so modern, compassionate and intuitively right — so ''fit for [[Twitter]]'' — that it is hard to understand how anyone can have thought otherwise. Yet think otherwise they did — consistently, at times, exclusively — from the publication of Smith’s ''Theory of Moral Sentiments'' onward, through the centuries, through the titans of American commerce, the Chicago School, down until the collective failure of nerve we see before us today. | |||
Revision as of 15:56, 24 September 2021
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The holder for the time being of a share in the equity of a company; a part owner of a corporate enterprise. Usually, shares are issued in registered form (as opposed to bearer form), because it is sort of important to know who — you know — owns the goddamn company. Whereas your creditors, on the other hand — could you really give a fig about them? Well, obviously you could, but as a general category, when you have issued that indebtedness in the form of freely transferable debt securities, it is that fact that someone holds them that mainly concerns you, rather than precisely who.
Once upon a time, not terribly long ago, the shareholder was an opaque yet sacred being, somewhat divine, to whose improving ends everyone engaged in the company’s operation twitched their every last fibre. This will to shareholder return sprang from the brow of Adam Smith himself, and his invisible hand:
“...Though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements...They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species”
Performance measurement was simple: the shareholders’ interest propelled the machine and that interest could be measured in a single dimension: earnings, before interest, taxes, depreciation, and amortisation. Nothing else mattered, and this even put a gate on the extent to which the company’s directors, officers, servants and agents could let their conflicting personal interests colour their pursuit of this noble, singular goal. You cannot hide from profit after tax.
But we live in a post-millennial world. Corporations are venal, selfish things, riven with bias, discrimination; a product of the West’s colonial history of oppression and wanton marginalisation. Adam Smith, though a vigorous opponent of slavery, back in 1763, is in danger of being cancelled.[1]
In place of shareholder capitalism, we see stakeholder capitalism. This asks corporations to oriented themselves to serve not just their shareholders, but all their “stakeholders” their customers, suppliers, employees, shareholders, the community, the environment, and the distantly marginalised who suffer invisibly under the awful externalities of industry while shareholders bask in the fruits of the pursuit of profit.
A corporation is bound to increase long-term value for all, and must not maximise shareholder profits value at the expense of other stakeholders.
This view seems so modern, compassionate and intuitively right — so fit for Twitter — that it is hard to understand how anyone can have thought otherwise. Yet think otherwise they did — consistently, at times, exclusively — from the publication of Smith’s Theory of Moral Sentiments onward, through the centuries, through the titans of American commerce, the Chicago School, down until the collective failure of nerve we see before us today.