The Problems with Stocks

Stock ownership seems like a no-brainer for our society, because it seems like all large companies are publicly held and the ones that aren't are just privately held by investors who bought up all of the stock.  In a bull market everyone seems to benefit from this ownership, whether it be their 401k or personal investment.  Even if you aren't invested in your own company, the fact that you aren't invested doesn't leave you worse off in a bull market.

In a bear market/recession the situation is very different.  Investors in a company have no feelings for the employees that work at the company.  And even if there aren't investors specifically knocking on the CEO's door telling him to be more profitable, the CEO is obligated through a fiduciary duty to do his best to maximize shareholder value.  In tough times this can seem all the more shocking and heartless to the employees of a company who are jettisoned so that investors can have some security.  So Microsoft, which has around $20 Billion in cash is cutting 5,000 jobs in a bad economy to save $1.5 Billion over the next 18 months.  A private company might be allowed to say "Let's ride this out and cut back on hiring" but a public company has to answer to some bloodthirsty money grubbing imaginary entity and from some of the investor responses I've read, they're actually saying "Too little too late" or "This should have happened a year ago."

It's hard to hypothesize what our society would be like if the outside investor angle was removed from the equation.  I read this story from MSNBC that reflects at least one possibility, but this was a completely optional choice, not something mandated.  Some wouldn't even find this fair and would believe that the family who owned the business was entitled to all the profits of its sale.  In reality, what they did was right because the business grew at least in part based on the performance of the employees, and while their salaries compensated them for that, a windfall of "profits" seems like it should also be equally shared.  Big companies don't operate that way, which is why the Waltons have billions while the employees make minimum wage and are supplemented by government healthcare.  The irony in bringing up the Waltons is that unlike Microsoft, which has no person with a controlling interest, if the Waltons wanted to say that Walmart would have the best healthcare of any company in the country they could do it, and it would just decrease the bulge in their pockets a small amount.  If the Waltons had the moral fiber of the Spungen family, maybe everyone would see Walmart in a different light.