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Shares

 

When you start a business, you always need capital: money for the initial investments. An established company that wants to expand, usually needs extra capital too.

Entrepreneurship without capital is impossible. You could say that capital is the main tool at the disposal of an entrepreneur. Without this tool, he cannot work.

 

One of the ways in which a company can collect capital, is by issuing shares. People who buy the shares, become  owner of a part of the company and in addition they help the company get the needed capital.

 

Whoever buys a share to help the company with capital, contributes to the company’s development. He or she takes part in that development. In case of positive results, the shareholder receives, possibly yearly, a modest dividend: a part of the profits. When the company is not doing too well, there is no payment of dividend.

 

In short: shareholders help companies to collect the needed capital, take part in the development of a company, and receive a small dividend when things go well. But...

 

The other side of shares

 

... there is another side to this. Shareholders of prosperous companies demand reorganizations resulting in thousands of lay-offs. Shareholders buying up companies to split them up, refinance them and let them go with high debts. Other shareholders continuously demand high dividends, forcing the company to move production to countries with miserable labor standards.

 

This is possible because shareholders, being the co-owners of a company, also have a say in the company’s doings.

 

This is enhanced by the fact that shares can be traded. Trading is done in the stock market, the marketplace for the trading of a company's stock or shares. Whoever owns shares can sell them again. The company gains no direct benefit from the stock market trade. Only the buyers or sellers benefit from the ongoing trade. And they both try to gain. The owners of shares have a vested interest in rising share prices. They only gain when prices go up.

 

The trade in shares seduces shareholders to go along with the stock market, instead of really connecting with the company and its development. If your return is 5 per cent in one month, you - of course - make a lot more than if you earn that return in one year.

 

We all have seen stock markets rise to improbable heights (‘bubbles’), followed by periods in which share prices decreased to improbable depths (depressions). This shows that the stock markets strongly depend on irrational expectations and estimates.

 

Making shares productive

 

The large social disadvantages of share holding as practiced today, are caused by the fact that we can trade shares, in combination with the fact that shareholders have a say in the company.

 

It is possible to avoid these disadvantages, and to deal with shares the way they were supposed  to:  providing the needed capital for an entrepreneur. For instance by issuing  shares through a foundation, by issuing share certificates only, by limiting the power shareholders have over a company, and by making sure shares cannot be traded in the stock markets. That is how, for example, Triodos Bank has arranged its share capital.

 

Of course, besides issuing shares, there are other ways for companies to finance themselves: through loans from banks and/or investors, crowd funding, financing by consumers, via Credit Unions, et cetera.

 

Especially companies that take corporate social responsibility (CSR) seriously, should refuse to issue shares the usual way.

 

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