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Comment by sclarisse | Hacker News Reader

The thing that protects them is limited liability, as it does many corporations. They can only lose everything the company has, and not more. If you, random HNer, have some holdings of this railroad in your stock portfolio, they cannot come after you for millions. Thus stock ownership is safe for non-billionaires.

Bankruptcy, rather — the serious kind — erases all ownership, sells the company off to new owners, and pays outstanding debts with the proceeds, in order of priority. This tends to result in more paid debts than an uncontrolled shutdown; fewer people want to buy a stopped business and it can’t make much money.

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The thing that really protects them is refusal to use anti-trust law to break these large uncompetetive monopolies up. A signal is when these companies begin to engage in massive stock repurchase programs.

Stock buybacks are economically equivalent to paying dividends, but they’re less costly from a tax perspective. Are dividends also to be banned? If so, what is even the purpose of a company, and who would possibly invest in a it knowing that it can’t pay any returns?

I suspect your question is rhetorical but I, and quite a few other Marxists, would say yes. Dividends, stock buybacks and other types of profit should be banned.

My issue is with the concentrated control of where the surplus value goes, I see the existence of dividends & stock buybacks as more of a side-effect of the system than a core-problem.

lol

> Stock buybacks are economically equivalent to paying dividends

Okay.. what's the chain of logic here?

> but they’re less costly from a tax perspective.

Sure.. but they also interfere with the "public ownership" ideal, which is the specific principle I was commenting about in the original.

> Are dividends also to be banned?

No.. just buybacks. I think you can still have dividends, even though there's some abstract idea that they're equivalent.

> If so, what is even the purpose of a company

The question is.. "what even is the purpose of public ownership." If you want to operate privately, I believe all of these questions become moot.

> and who would possibly invest in a it knowing that it can’t pay any returns?

The public. Which is what we want. Or, again, stay private.

Buybacks don’t interfere with public ownership. They just boost the share price. Any member of the public who wants to remain a shareholder just… doesn’t sell his shares.

If buybacks and dividends are the same thing, then why even allow both to exist? Just eliminate buybacks and enjoy the higher tax revenue. And maybe also accompany it with a tax cut on dividends to even things out slightly. We want companies to become more efficient and increase productivity, but we also want society to benefit from that in the form of higher tax revenue. Eliminating buybacks accomplishes both.

Buybacks juice earnings per share. Stock valuation uses P/E ratio as an input. Meaning buybacks disproportionately benefit upper management, whose compensation is tied to the stock price. There's a principal agent problem here. Management may elect to do a buyback even if it's not in the company's best interest. Dividends don't have that problem.

Returning money to investors is great, whether it’s buybacks or dividends. It’s the core purpose of a company. The primary alternative is growing the bigcorps ever bigger, more powerful, and dangerous. Ever-expanding bloated conglomerates.

The good argument against buybacks is that companies tend to do it when the stock is high, and that’s bad for the shareholders.

> It’s the core purpose of a company.

It's not though. A state (New Jersey for J&J) gave the company a charter to do X.

J&J's charter was not to return money to shareholders [1].

[1]: https://www.investor.jnj.com/_document/johnson-johnson-resta...

I feel like there’s probably a more meaningful counterpoint to be presented here than a legal document which describes the purpose of J&J as, quote, “to engage in any activity within the purposes for which corporations may be organized under the New Jersey Business Corporation Act.”

Do you have a document stating that J&J's purpose is to buy back stocks?

As it stands, I have a legal document under penalty of perjury that says their purpose is to do business as allowed by NJ. And you _just_ have a statement made by yourself without penalty that their purpose is to return money to investors.

Sure, my document doesn't say they can't do buybacks. But to say the document calls it their purpose is highly misleading.

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