June
7, 2014 - Do I like external shareholders of my company if I open one?
[Currently I don't like to open and operate one.]
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I have seen many ridiculous shareholders in the stock market. They have the
priority of booting up share prices even if company had to pay out generous
dividends or buying back shares by borrowing money. They did not think about
expanding or looking for better opportunities for the business or company. Btw,
share prices going up are their goal.
I like the idea ESOP (employee share ownership program) is to sell shares to
employees, thus everyone in the company would have common interests [on the
same boat] to grow or make business sustainable. Company future would come
before bonus or dividends, because continuing bread and butter for all.
Getting term bond [short to midterm debt] for expansion is better than issuing
shares -> shares mean getting investors in the company. Of course paying off
debt is preferable to save money spent on interest payment. Also let bond
holders out of company meetings, because they are interested in on-going
concerns of the company.
Some external share holders generate public media or attention for their
purposes [higher share price]. This would draw attention and effort of
management to deal with this ridiculous issue. Management is supposed to run
the company and find additional business ventures or bread and butter to all
employees in case of ESOP.
Of course I would need a good accountant in this case. However company would do
the following [percentage? I don't know]:
* Only employees are shareholders of the company.
* Save some cash for emergency situation. Extra cash save if very profitable
for possible business expansion.
* Some cash would be paid out as bonus or dividends to employees.
* Cut down or eliminate dividends or bonus to shareholders to get extra cash in
additional business ventures [external shareholders would object to this
strategy]. This would result in less amount of debt by bond holders --> less
interest payment. Dividends and bonus would resume when the new business catch
up and generate additional cash. [May be surprised bonus or dividends at that
time.] Pay off debt is an important goal.
* Lower profit margin than 30% to gain market shares or higher volume sales or
more services to generate more cash or revenues. External shareholders would
object to this strategy.
* Employees should have similar views in business or strategies, i.e. not high
demand in salaries or benefits. Company is for all employees.
* Provide simple and efficient services to customers. Anyway I like to develop
something that most of customers like - not what I like. [Insane is not
considered as a customer.]
* Provide good quality of product. It may be a little bit more expensive, but
it would make customers happy and come back for additional products. Products
must work in the customer environment; however, going far beyond requirements
may be too expensive to sell.
* We rarely talk about product quality in Canada or western world, because
products must be developed and tested according to specifications. If we didn't
deliver as we said, then rumors would circulate and company would be in
trouble.
* Because the goal is to keep money in the company for continuing and expanding
of business, it would be fair to calculate company value at a time [may be time
consuming or expensive to do quarter reports for a private ESOP company], when
a staff left the company or retired to give him/her additional money - not only
his/her shares - company does keep cash/asset as a reserved. The ESOP plan that
I knew keeps share price at $1 all the times. Employees would get more shares
when the company is profitable by the fiscal year end - or less [deducted] if
company made less money or at lost.
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