corporate ownership

Heavy is the Head that Wears the Crown

© Can Stock Photo / tashka

Pop quiz: if Joe Smith from Detroit works for General Motors, who is at the top of his chain of command? His boss’s boss’s boss’s boss, in other words? (I pick GM as a random example, but this exercise is true of any publicly traded company.)

If you own any shares of General Motors, the answer is you, personally. Makes you feel pretty important, right?

Of course, there are some caveats. General Motors has over 1 billion shares of stock floating around, and this is not an unusually large amount for an exchange-listed company. If you only own, for example, 1 share of GM stock you have less than a one-billionth part of the collective ownership authority over the company. Still, as a stockholder you are entitled to a have a proportionate voice in how the company is run, however small that voice may be. It is a powerful idea, and this idea of shared ownership is a cornerstone of our modern economy and way of life.

The most visible parts of your rights and responsibilities as a shareholder are, inevitably, the proxy voting materials that you may periodically receive as a stock owner. Your shares entitle you to vote on the company’s board of directors, as well as other significant decisions that the company may make from time to time.

For smaller investors such as you or I, shareholder materials can sometimes be more of a nuisance than anything else. Even if we got together with all of our clients and voted together as a bloc, we still would not command enough shares to influence a shareholder vote much. Moreover, we would generally want to stick with the default recommendation of the company management. If we disagreed with the job management was doing, we would not want to invest in the company in the first place! There are sharks out there in the investment world that look to gobble up companies and take over their management, but in here we are all pretty small fish—we just look for successful companies that we can swim along with. Most of the time, we are content to leave shareholder decisions up to the big fish.

That said, it does happen occasionally that a vote or shareholder election comes up that may have some effect on you personally. We keep an eye on what shareholder materials get sent out so that we can get in touch if something comes up that you ought to act on.

The bottom line is that the privileges of stock ownership can wind up translating into a lot of mail, and it can be difficult to sort through it all sometimes. Clients, if you receive any shareholder communications that you do not understand, please do not hesitate to pick up the phone or email us for help making sense of it.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Stock investing involves risk including loss of principal.

Renting the Oil Company

© Can Stock Photo Inc. / fredgoldstein

We all seem to know intuitively that rent on a residence covers all the expenses of ownership, plus a profit for the landlord. Hence most people prefer to own their homes rather than pad the landlord’s wealth.

And yet when we buy a gallon of gasoline, we are paying all of the oil company’s expenses plus a profit for their owners. We pay the cost of refining crude oil into gasoline, transporting it to retail locations, or running the store at which we purchase the gasoline. Not to mention the cost of exploring for and pumping the crude oil and shipping it to refineries.

But if we own a piece of the action (in the form of shares of common stock) in an oil company, we indirectly own a share in the oil wells and refineries and transportation and everything else needed to put a gallon of gasoline within our reach. Own or rent? We prefer to own—and by the way, if you prefer to rent, thank you for doing business with our oil company!

We and our clients own phone companies and clothing manufacturers and car makers and raw material producers and major retailers and airlines and nearly every other segment of the economy. From the time we wake up and brush our teeth, put on clothes, go to factories and shops and offices, use energy through the day… we are doing business with ourselves. We are owners, not renters.

It is our opinion that a person who owns no common stock or other business rents everything: the refineries, auto manufacturers, food distributors, trains and planes, communications networks. They are paying rent for everything that goes into their life, without receiving any benefits of ownership.

Rent or Own? You might want to own shares of companies for the very same reason you prefer to own your home. We are available to discuss whether this philosophy fits into your plans and planning—call or write.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Stock investing involves risk including loss of principal.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Are You a Dirty Capitalist Too?

© Can Stock Photo Inc. / robwilson39

Since the 2007 financial crisis broke, we’ve been hearing a lot about the carelessness and greed of our financial system. The pursuit of corporate profits, we are told, led our economy to ruin and apparently will do so again in a heartbeat. Big corporations and financial institutions are crushing the middle class underfoot and choking the life out of the American dream. These are the sound bites we hear daily
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Corporate malfeasance certainly played a role in the crisis and we are gratified and relieved when we see it punished. But these excoriations of our financial system overlook one important fact: capitalism is a fundamentally democratic institution. All of us reading this blog can—and in most cases, do—participate fully in the capitalism system.

When you purchase shares of stock, those shares represent a unit ownership in a corporation. What’s more, the shares you buy are fundamentally identical to the shares that those “greedy” Wall Street banks and hedge funds are buying, with all the same rights and privileges. They might have more shares but the rewards of ownership are divvied out proportionately. When a corporation pays out dividends every share of the company gets its fair piece; they can’t pay out some owners and not others.

Some of our readers may be thinking, “This is all well and good for the rich people who own stocks, but what about us little folks?” The beauty of this system is that many of us little folks also own stocks. Many of us contribute money out of our paycheck towards a retirement or pension plan, through which we are beneficial owners of stock market investments. That makes us capitalists.

And it’s a good thing, too. Through our collective investments, millions of modest savers are pooling their money to create capital. Our investments and retirement savings turn into factories, datacenters, and hospitals—all of the machinery of modern life. Whether you realize it or not, if you have any investments you may very well own a tiny slice of many of those things. So when you feel you’re being gouged by an overly greedy corporation, just remember that their “unfair profits” are also funding the retirements of millions of regular workers just like you—and possibly you, yourself.

We know the system isn’t perfect. We can’t guarantee that corporations will always act wisely or ethically, and it’s important to remain vigilant. We believe the best and surest way to make sure that our interests are represented by the system is to participate in it. If you want to get involved, call or email us.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Stock investing involves risk including loss of principal.