On the other hand, I have made good friends through the workplace who I would start a startup with in a heartbeat.
"A CEO's high compensation is justified by the skills, experience, and dedication they bring to the role."
I doubt this is only an issue at startups. I've noticed that the higher up the rungs of the corporate ladder you climb, the easier it is to get away with doing nothing all day.
Same. Absolutely not in question.
IMO, it should be illegal to launch a limited liability company/corporation and only allow specific people to buy shares. I object to the idea of incorporation and limiting directors' liability to begin with but since it is allowed, at the very least, it should be a requirement under the law that the shares be on the open market such that anyone who wants them can buy them and resell them at any time.
The current system is a scam. They can select exactly who gets to ride the ship to the promised land. That's completely wrong, discriminatory and evil.
No, I deeply disagree with this. This is the reason we have issues like the 737 Max. Earnings reports and a bunch of idiot shareholders who don't understand a flying hoot about aircraft owning bits and pieces of an aerospace company and exerting control over it and pressure to "beat earnings".
I'm very much on board with being generous in giving ownership to employees. But open market? No. F that. Avoid it as long as possible and pay your employees dividends instead.
And also the equity that they give is based on some valuation that's not even real, it's hard to hold that value of.
I don't understand how this could possibly work.
If I start a company on my own and I provide all the equity then I own all the "shares". What would it mean for those shares to "be on the open market"? If I'm not selling them then no one can buy them.
And if it was a trivial low-regulation thing to create shares and sell them to the public, it would undermine the entire body of regulations they put in place to prevent scams and ensure transparancy.
>The current system is a scam. They can select exactly who gets to ride the ship to the promised land. That's completely wrong, discriminatory and evil.
No, "they" can not select who gets to ride the ship to the promised land. They can only make an offer that others are free to accept or reject.
If I think that my labour makes a huge difference to the success of a company, then I'm not going to provide that labour unless I get a huge chunk of the company. It's a negotiation. I can just walk away and start my own company.
And by the way, if you got your wish and limited liability was abolished, then all shareholders would be on the hook for any and all debts the company cannot pay (jointly and severally). That would include employees paid in shares. It contradicts your desire for broad share ownership.
If you own all the shares initially, it means you get to set the price to whatever you want (and hope that someone is willing to pay that price), or you can just hold them and keep them all to yourself.
BUT, if you decide to sell them, you can't just sell them to a specific person over the counter. You'd have to sell on a market so that anyone can potentially buy them and potentially outbid your intended investor.
>> And if it was a trivial low-regulation thing to create shares and sell them to the public, it would undermine the entire body of regulations they put in place to prevent scams and ensure transparancy.
These regulations are completely useless at preventing scams and it's not the government's job to protect people from scams ahead of time. It's extremely disingenuous to suggest that the government can even know what is a scam ahead of time... Scams like FTX were allowed to grow to billions of dollars and the regulators didn't bat an eyelash until the whole scheme was blown wide open. The only correct, honest way to handle it is that if people get scammed, they can sue the scammer to try to recover as much money as possible. The person who lost the money is partly responsible because they failed to judge the founder's character.
>> If I think that my labour makes a huge difference to the success of a company
Nobody's Labour ever makes a difference. The success of any project is all about capital, political leverage and media exposure. Let's be honest here.
>> And by the way, if you got your wish and limited liability was abolished, then all shareholders would be on the hook for any and all debts the company cannot pay (jointly and severally). That would include employees paid in shares. It contradicts your desire for broad share ownership.
I would be fine with that. My strategy would be to only invest in small or medium-sized companies whose founders I can trust and who can manage their risk. The bigger the company, the higher the risk. All of society would be better off if everyone did this. This is not a new concept. It used to be how humans did business for thousands of years. They did just fine, in spite of having very little technology at their disposal. Then finally honesty would be worth something again...
It's terrifying how everyone blindly trusts criminals just because the government gave them its stamp of approval.
What, to you, is the difference between these two situations?
1. One person decides to form a company and has all the shares. After six months, he realizes he should really have worked with a cofounder, so he closes that business and opens a brand new one with this cofounder, the two of them now equally owning half the shares.
2. One person decides to form a company and has all the shares. After six months, he realizes he should really have worked with a cofounder, so he hires a very high level early employee and gives him half the shares.
How does this change based on the number of co-founders/early hires? Why does it make a difference if their need for a new person surprises them, so they start all over with the distribution of the equity of a new "business," or they plan for it in advance and set equity aside for such hires?
If you get six months into "working" on a project and realize you're missing some core skill, "hire" someone. Call them "cofounder." Give them an appropriate amount of the shares.
It's exactly the same in the end as closing one business and starting a new one that's divvied up the same way.
I'm arguing that being able to give important employees a stake in the company is just good sense, and having to "sell them on the open market" instead is about as inane an idea as I've heard this year.
So if I was looking for someone who would build a company with me, someone who would take on an entrepreneurial role, provide expertise, labour or personal connections, I wouldn't be allowed to do that. I wouldn't be allowed to give shares to employees in exchange for labour either. Nor would there be any family businesses.
>Nobody's Labour ever makes a difference. The success of any project is all about capital, political leverage and media exposure. Let's be honest here.
Capital is a factor that leverages and buys labour. Without labour the result of this equation is always zero. Without a product or service you have no customers, regardless of how much free media coverage you may be getting (for whatever reason).
>My strategy would be to only invest in small or medium-sized companies whose founders I can trust and who can manage their risk.
Good luck with that. Personal trust is not a replacement for limited liability though, especially not if shares are publicly traded.
How would a creditor decide how much to lend to a company if the personal assets of all shareholders are used as collateral?
If I owned shares in Microsoft, would I have to provide a payslip and a bank statement to Microsoft's bank? Would they do a credit check? And if I sold my shares, would Microsoft have to pay back part of a bank loan if the buyer's net worth was less than mine?
I don't think you have thought this through.
>So if I was looking for someone who would build a company with me, someone who would take on an entrepreneurial role, provide expertise, labour or personal connections, I wouldn't be allowed to do that. I wouldn't be allowed to give shares to employees in exchange for labour either. Nor would there be any family businesses.
A good market is an open market. If you look for someone with "certain expertise", you can offer that for money, while at the same time putting shares of your company on the market. The person could then buy the shares for money, and you can give him that money for his "expertise". But if someone else outbids that person on the shares, he will still get the money, but someone else gets the shares. If the person ONLY wants to work for those shares, and not for money, he will have to outbid the market price. If he doesn't want to outbid the market price, and you agree with that, you actually want to give him shares for free.
If my investors are going to bug me over returns eventually, I prefer to have control on who they are rather than leaving it to strangers in the open market that may be misaligned. That's one extra reason many companies don't go public nowadays.
I still think that this idea is wholly unpragmatic. It would prevent all strategic partnerships where the value provided is only partially financial.
No, the company would still do its own accounting with its own income, balance, cashflow ledgers... Banks would have to look at the company's net assets to loan against. If the company goes bankrupt, however, and the bank cannot recover the collateral from the company itself, then it should be allowed to pursue the shareholders (who would be liable in proportion to how many shares they hold).
Another major difference would be that if the company was negligent or committed a crime, then all shareholders could potentially be held personally liable to some extent. IMO, purely passive investing should not be allowed. The shareholder should be responsible for staying up to date about what their company is doing.
Most businesspeople think the same.
What a strange claim. Protecting people from scams is literally what the Federal Trade Commission is for, among other agencies. Bankman-Fried was arrested due to breaking existing laws that define what some scams are ahead of time.
> Nobody’s Labour ever makes a difference.
I can see why some people with little to no experience in business or starting companies can get this impression and form pessimistic opinions based on negative stuff you hear in the news or social media. Fortunately, it’s only true of the worst offenders, and not generally true. People’s efforts do make the difference to the success of startups all the time. Having money for sure helps, and primarily affects whether people can afford to try, and for how long, but it’s not as good at ensuring success, effort and timing and luck play larger roles there.
> The bigger the company, the higher the risk.
Why do you believe this? I’d guess fund managers and most investors would outright disagree. The safest single company stocks are the largest companies. A bigger company may have more to lose, but they’re bigger in the first place only because they survived the small and medium phases. The probability of a company failing is much higher when small, and most startups fail before ever getting to small company size, and most of those fail before getting to the medium or large company size.
Agree also breaking corporate liability shield gets insane quickly. You're going to have pension funds go broke for owning stock in the wrong company and employees on the hook for start-up debts when start-ups fail.
Is GP sure they are imagineering solutions, and not much larger problems?
You should create your own startup without your friend then.