Ownership and Deciding Policy: Companies, Shareholders, Directors and Community

by Manfred Davidmann

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Companies (Corporations)
Allocating Profits
Maximising Profits
Decision-taking: Company, Directors, Employees
Motivation and Pay of Directors
Work and Pay: Owners, Directors, Employees, Community
Notes <..> and References {..}

Relevant Current and Associated Works

Relevant Subject Index Pages and Site Overview


A short statement which describes the system by which a company's majority shareholders decide policy and control the company.


A public company can have an unlimited number of shareholders. Its shares are available to the public and are quoted on the stock exchange. Shareholders benefit from limited liability which means that after they have paid for their shares they are not responsible for the company's debts. {6}


Some of the profits are paid out to shareholders as dividends and some are retained in the company by allocating them to reserves.

The value of a company's shares depends on its assets and its prospects. If you own 5 per cent of the company's share capital then 5 per cent of its assets belong to you. Any change in the company's assets is reflected in the value of its shares. When profits are retained by a company then this increases its assets which in turn increases the value of each share. An increase in the value of a share is called a capital gain.

So shareholders benefit from profits paid out as dividends and also from capital gains. Dividends are received each year and capital gain is realised when the shares are sold. <1>


Ownership is the right to possess something and to decide what is to be done with it. If I own something it belongs to me and I decide what is to be done with it. An example would be owning a house.

Possession is having something in one's custody as distinct from owning it. If I possess something it belongs to another but I can decide how to use it. An example would be renting a house.


Shareholders can elect a board of directors, usually based on one vote per share. A shareholder who owns a majority of a company's voting shares has a controlling interest. His vote decides who, apart from himself or his representative, is appointed to the board of directors and so determines the policy of the business. This applies also when a few shareholders together own the majority.

Hence other shareholders usually have little say or interest in deciding policy or in the running of the company. What is left for them to decide is whether to sell the shares they hold or whether to buy more.

So the majority shareholder has in effect taken possession of the ownership rights of the other shareholders and can use the company's assets for his own ends.


Shareholders would like profits to be maximised in the short term (dividends) and long term (capital gain and security). And directors take such decisions on behalf of the controlling shareholders and decide how to divide profits between dividends and reserves (capital gain).

In practice directors are generally required by man-made laws to act first and foremost in the interests of the owners, so that it is profit which is maximised. Short-term and long-term profits can be and are being maximised regardless of the cost to others, that is regardless of the cost to the community. {2}

Profits can be increased by reducing labour costs, for example. Those wishing to increase profits regardless of the cost to others, will thus aim to reduce the standard of living of the working population, will aim to increase the needs of the working population so that people will work for less. {2-3, 5}


A company (Co. Ltd, PLC, corporation) {6} is apparently a legal fiction. In law it is an entity which can be sued in a court, or sue others, for matters such as money owed or breach of contract. Although a company does not take decisions it can be held responsible and can be held to account for decisions taken by individuals. To that extent it serves as a cover for those who take the decisions.

Note that a 'company' cannot act. It is individuals who act, who are responsible and so accountable for the policies they decide on or omit to decide on, for the decisions they take or omit to take, for what they do or omit to do, and for the resulting consequences.

Owners appoint directors to take decisions on behalf of the owners. Directors in turn appoint senior managers to have the decisions carried out. A company's employees are employed to put into effect policies decided by its directors.

Hence it would seem to be owners and directors who are responsible and who should be held accountable for actions of the company. {2}


Directors aim to maximise profits, are not motivated by job satisfaction, are motivated by pay in its various forms, by greater wealth and by greater influence, patronage, power. {4-5, 7}

And so directors are motivated to expand the enterprise they control by diversifying into other related areas, by taking over other enterprises, to improve profit performance.

For some time now pay of directors has been what the market will bear. It is the maximum amount the controlling shareholders will not object to in the light of dividends they receive and the increase in the value of the shares they own. It is what owners decide to pay themselves.


The National Remuneration Pattern {1} is a precise pictorial record of the differentials within a country, from top to bottom, from young to old. It shows the relative value placed on different kinds of work. At the top are the owners or those who work directly for them, at the bottom is the mass of wage-earners.

The pattern of differentials shows that what is rewarded is service to the owners and their directors (establishment) rather than ability and service to the community. {1}

To owners and employers the worth of a job is what has to be paid to get it done. They want work to be done at the lowest rate at which they can get it done.



<1>     When a company is unprofitable, then dividend payments can be missed and shares can lose their value.


{1}   Work and Pay
Manfred Davidmann
{2}   Social Responsibility, Profits and Social Accountability
Manfred Davidmann
{3}   Style of Management and Leadership
Manfred Davidmann
{4}   Motivation Summary
Manfred Davidmann
{5}   The Will to Work: What People Struggle to Achieve
Manfred Davidmann
{6}   Ownership and Limited Liability
Manfred Davidmann
{7}   Building Societies
Manfred Davidmann

Relevant Current and Associated Works

A list of other relevant current and associated reports by Manfred Davidmann:
Title   Description
Style of Management and Leadership     Major review and analysis of the style of management and its effect on management effectiveness, decision taking and standard of living. Measures of style of management and government. Overcoming problems of size. Management effectiveness can be increased by 20-30 percent.
Role of Managers Under Different Styles of Management     Short summary of the role of managers under authoritarian and participative styles of management. Also covers decision making and the basic characteristics of each style.
Directing and Managing Change     How to plan ahead, find best strategies, decide and implement, agree targets and objectives, monitor and control progress, evaluate performance, carry out appraisal and target-setting interviews. Describes proved, practical and effective techniques.
Motivation Summary   Reviews and summarises past work in Motivation. Provides a clear definition of 'motivation', of the factors which motivate and of what people are striving to achieve.
The Will to Work: What People Struggle to Achieve   Major review, analysis and report about motivation and motivating. Covers remuneration and job satisfaction as well as the factors which motivate. Develops a clear definition of 'motivation'. Lists what people are striving and struggling to achieve, and progress made, in corporations, communities, countries.
Work and Pay   Major review and analysis of work and pay in relation to employer, employee and community. Provides the underlying knowledge and understanding for scientific determination and prediction of rates of pay, remuneration and differentials, of National Remuneration Scales and of the National Remuneration Pattern of pay and differentials.
Work and Pay: Summary   Concise summary review of whole subject of work and pay, in clear language. Covers pay, incomes and differentials and the interests and requirements of owners and employers, of the individual and his family, and of the community.
Exporting and Importing of Employment and Unemployment   Discusses exporting and importing of employment and unemployment, underlying principles, effect of trade, how to reduce unemployment, social costs of unemployment, community objectives, support for enterprises, socially irresponsible enterprise behaviour.
Transfer Pricing and Taxation   One of the most controversial operations of multinationals, transfer pricing, is clearly described and defined. An easily-followed illustration shows how transfer pricing can be used by multinationals to maximise their profits by tax avoidance and by obtaining tax rebates. Also discussed is the effect of transfer pricing on the tax burden carried by other tax payers.
Inflation, Balance of Payments and Currency Exchange Rates     Reviews the relationships, how inflation affects currency exchange rates and trade, the effect of changing interest rates on share prices and pensions. Discusses multinational operations such as transfer pricing, inflation's burdens and worldwide inequality.
Organising   Comprehensive review. Outstanding is the section on functional relationships. Shows how to improve co-ordination, teamwork and co-operation. Discusses the role and responsibilities of managers in different circumstances.
Social Responsibility, Profits and Social Accountability   Incidents, disasters and catastrophes are here put together as individual case studies and reviewed as a whole. We are facing a sequence of events which are increasing in frequency, severity and extent. There are sections about what can be done about this, on community aims and community leadership, on the world-wide struggle for social accountability.
Social Responsibility and Accountability: Summary   Outlines basic causes of socially irresponsible behaviour and ways of solving the problem. Statement of aims. Public demonstrations and protests as essential survival mechanisms. Whistle-blowing. Worldwide struggle to achieve social accountability.
Co-operatives and Co-operation: Causes of Failure, Guidelines for Success   Based on eight studies of co-operatives and mutual societies, the report's conclusions and recommendations cover fundamental and practical problems of co-ops and mutual societies, of members, of direction, of management and control. There are extensive sections on Style of Management, decision-taking, management motivation and performance, on General Management principles and their application in practice.
Using Words to Communicate Effectively   Shows how to communicate more effectively, covering aspects of thinking, writing, speaking and listening as well as formal and informal communications. Consists of guidelines found useful by university students and practising middle and senior managers.
Community and Public Ownership   This report objectively evaluates community ownership and reviews the reasons both for nationalising and for privatising. Performance, control and accountability of community-owned enterprises and industries are discussed. Points made are illustrated by a number of striking case-studies.
Ownership and Limited Liability   Discusses different types of enterprises and the extent to which owners are responsible for repaying the debts of their enterprise. Also discussed are disadvantages, difficulties and abuses associated with the system of Limited Liability, and their implications for customers, suppliers and employees.
Creating, Patenting and Marketing of New Forms of Life     Evaluates problems in genetic manipulation, and consequences of private ownership of new life-forms by multinationals. Lists conclusions and recommendations about man-made forms of life, their ownership and patenting, about improving the trend of events.
The Right to Strike   Discusses and defines the right to strike, the extent to which people can strike and what this implies. Also discussed are aspects of current problems such as part-time work and home working, Works Councils, uses and misuses of linking pay to a cost-of-living index, participation in decision-taking, upward redistribution of income and wealth.
Corrupted Economics and Misleading Experts   Shows how 'Economics' is used to misinform and mislead the general public. Clearly states underlying considerations of specific important economic relationships and comments on misleading political interpretations and on role of independent experts.
Reorganising the National Health Service:
An Evaluation of the Griffiths Report
  1984 report which has become a classic study of the application and effect of General Management principles and of ignoring them.

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Relevant Subject Index Pages and Site Overview

The Site Overview page has links to all individual Subject Index Pages which between them list the works by Manfred Davidmann which are available on the Internet, with short descriptions and links for downloading.

To see the Site Overview page, click Overview

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Copyright    ©    1996    Manfred Davidmann
All rights reserved worldwide.

28/11/96 Completed
17/03/97 To Website
02/06/02 Added 'Relevant Current and Associated Works'