Joint Stock

A joint stock company is a special kind of Partnership... Shares express ownership interest and decision making power in the company, and shareholders are free to transfer their shares to someone else without needing consent of the other shareholders. While a normal partnership also has ownership interest, the difference is that in a Partnership, interest can only be transferred to someone else if all the partners agree to it... A for-profit corporation (C-Corp) is a Joint Stock company, except that the shareholders have no liability (Limited Liability) towards the corporation's debts... The earliest records of joint-stock companies appear in China during the Tang (c 750 AD) and Song dynasties. The Tang dynasty saw the development of the heben, the earliest form of joint stock company with an active partner and one or two passive investors.

The Ownership of Enterprise by Henry Hansmann ISBN:0-674-00171-0 He explains why different industries and different national economies exhibit different distributions of ownership forms. The key to the success of a particular form, he shows, depends on the balance between the costs of contracting in the market and the costs of ownership. And he examines how this balance is affected by history and by the legal and regulatory framework within which firms are organized. (Theory Of The Firm)

Henry Hansmann on Employee Ownership/ESOP - Experience with employee ownership offers a mixed picture. True employee ownership, in which employees participate meaningfully both in earnings and control, appears effective in a surprisingly broad range of circumstances so long as ownership can be placed in the hands of a class of employees who have highly homogeneous interests. But where, as is common, this requirement cannot be met, investor ownership has the advantage. As a consequence, the boldest new experiments in employee ownership - UnitedAirlines, privatized Russian firms, even Air France - seem likely to serve only as temporary expedients in industrial restructuring.

William H Simon on Jeff Gates' proposals. Another consideration is that, for many externalities, government regulation is a superior response to expanded ownership. For example, for many decades, many banks and insurance companies were customer-owned. They were-and a few surviving ones still are-called "mutuals" (Mutual Bank). Mutuals are owned by their depositors or policyholders. However, in recent decades, the mutuals have been converting to conventional corporations, and even in the surviving ones, there is no indication that the customer owners are very active. As Henry Hansmann has pointed out, the most likely explanation is that government regulation has made customer ownership obsolete. When customers had to fear that the companies would behave recklessly and opportunistically with their money to the point they would be unable to deliver the promised benefits when due, ownership was an important check. But now, most depositors and policyholders seem to believe that regulation will protect them adequately.

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