Is there an alternative?
Corporations were invented. Could we invent something better?
Or is it just human nature to devolve into the current state of affairs?
Corporations were invented. Could we invent something better?
Or is it just human nature to devolve into the current state of affairs?
How about making just a small tweak to the limited liability corporation legislation/rules? Currently the main purpose of a corporation is to maximize the (long term) shareholder value. What if the purpose was to maximize the long term goods sold, taxes paid or salaries paid instead? Note that you would still need to pay a decent return to shareholders in order to maximize these other things, just like currently you need (usually) to sell goods, pay a salary and pay your taxes to maximize the shareholder value.
(This may sound like a joke, but I am actually serious. Nobody has been able to justify so that I would have understood why it is the common stock holders whose value a corporation maximizes instead of other stakeholders. After all, the original reason limited liability was invented was to enable projects that bring good for the society, but are so damn risky that nobody is willing to take the full liability.)
No, you would still need to grow to a large company with lots of revenue, but if the metric to optimize is salaries paid, then paying shareholders anything at all is in direct conflict with paying salaries to workers. The problem here is designing set of incentives that would encourage appropriate results, and the difficulty is that not all incentives work equally well, or even at all.
Paying workers anything at all is in direct conflict with generating shareholder value.
Key is "long term". If you want to maximize long term salaries, you must pay a decent return to equity.
On the other hand, there's absolutely no need to pay anything to shareholders for a company to operate, other than legal obligation. Shareholders going on strike makes absolutely no difference for the company.
you need to get funding in order for company to continue operating. If you don't pay a decent return for the funding, you just won't get funded.
> Shareholders going on strike makes absolutely no difference for the company.
This applies only to companies that do not require capital to operate/grow.
Of course, if you get yourself a reputation of not returning money to investors, you'll unlikely to get funded the next time, and if the investors have no way to force the company to pay dividends, they will fund few companies in the first place. The point is, maximizing salaries paid is a terrible metric, precisely because of bad incentives it creates.
> This applies only to companies that do not require capital to operate/grow.
But when they require capital to grow, you aren't returning the money to investors anyway -- what would be the point of that? The investors only expect the dividends once the capital needs of the company are satisfied, and once that happens, the company no longer needs the investors.
It wouldn't fix everything, but it would guarantee more competition and hopefully keep corporations comprehensible.
[1] https://en.wikipedia.org/wiki/Dunbar%27s_number
[2] Vsauce2 has a good introduction: https://www.youtube.com/watch?v=O2qjRG6iV8M
[3] Why 80%? To allow room for family/etc. This number is merely a suggestion; better values require actual research.
What do you do with the assets? Liquidate them? If so, you’ll just periodically kick out minority shareholders (or promote consolidation).