David Goldman seems to have answered my question. According to the Wikipedia article he gave us the link to, corporations are limited in the number of shares they can own in themselves. The entry even says, "A corporation cannot own itself." So that's that. And I thought I had stumbled on another example of socialism growing in the womb of capitalism. Now go back to writing your dissertation, David! [What is it on, by the way?]
I will! I will! I'll add your voice to those of my advisor, my dissertation committee, my wife, my sister, and my in-laws reminding me to write. It's on the ethics of response to wrongdoing—in particular, on whether broadly antagonistic responses are justified or not.
ReplyDeleteI'm curious where you saw socialism showing up—is it behind the thought that the self-owned corporation should pay its employees as much as it possibly can? Are you thinking that, in the absence of owners, the corporation should be identified with its workers?
If you write one page a day, every day, whether you feel like it or not, starting with page 1 of chapter 1, and if you never re-write, in eight months, you will have a 240 page draft. If you email me a page a day, I will read it, and respond that same day [or early the next morning]. I am not kidding. This is the way to get a dissertation done! I have done this with three other doctoral students, every one of whom finished the dissertation, and is now teaching.
ReplyDeleteIt doesn't seem to happen in the US (for reasons I'm not sure about), but particularly in asian countries there seem to be many company groups where each company is majority owned by the others, so that the managers - and not the non-corporate shareholders - actually have full control of the companies. Google "keiretsu".
ReplyDeleteThis rings a bell. In an airport –it turns out it was in 1988 –I picked up a copy of The Economist with an article on this. I took notes in my commonplace notebook. It said that corporate buybacks of stock are banned in some European countries (e.g. Austria) because a corporation should use surplus capital to expand, creating jobs. That, however, leads to inefficient conglomerates. Reasons for buying back stock:
ReplyDeleteRepurchase of stock gives investors a wider range of options, increasing efficiency of capital allocation.
If instead the corp. raised dividends that would lead to higher expectations, and conversely, a drop in dividends would be seen as a sign of trouble.
Large dividends give the stockholder a larger tax bill without choice, whereas the same $$ as a repurchase give the stockholder lesser tax and the choice when to incur it.
Buybacks are a good way to manipulate debt/equity ratio, especially because interest is a deductable expense.
Buybacks facilitate employee pay in stock options without issuing new stock
Those are my notes. I can’t speak for their wisdom or accuracy, but it is notable how many reasons for buybacks are to do with taxes.
Have a good vacation,
Regular reader Mike Sinclair
Good advice for those writing dissertations.
ReplyDelete