The Companies Around Us :
When a group of people goes into business together, they usually form a
company. Most business in the world is done by companies. The word
“company” comes from a Latin word that means “companion.”
The formal name for a company is “corporation.” Corporation comes from
“corpus,” another Latin word, meaning “body,” in this case, a body of people
who join together to conduct business. “Corpse” also comes from “corpus,”
although this has nothing to do with the subject at hand, since corpses are
unable to do business.
To form a corporation is easy. All it takes is paying a small fee and filing a
few papers in the state in which you want to maintain a legal address.
Delaware is the most popular choice because the laws there are favorable to
business, but thousands of new corporations are formed every year in every
state. Whenever you see an “inc.” attached to the end of the name of a
business, it means that company has filed the papers to become a corporation.
“Inc.” is short for “incorporated.”
In the eyes of the law, a corporation is a separate individual that can be
punished for bad behavior, usually by the imposition of a fine. That’s the
main reason owners of a business go to the trouble of getting incorporated. If
they do something wrong and they get sued, the corporation takes the rap and
they get off the hook. Imagine if you borrowed your parents’ car without
permission and ran it into a tree, how much better you’d feel if you were
incorporated.
Do you remember the Exxon Valdez disaster in Alaska, when an oil tanker
ran aground and spilled 11 million gallons of oil into Prince William Sound?
This created a huge mess that took months to clean up. The tanker belonged
to Exxon, America’s third-largest company. At the time, Exxon had hundreds
of thousands of shareholders who were part owners of the business.
If Exxon hadn’t been incorporated, all those people could have gotten sued
individually, and lost their life savings on account of an oil spill that wasn’t
their fault. Even if Exxon were found innocent, they would have had to pay
the legal bills to defend themselves—in this country you’re innocent until
proven guilty, but you pay the lawyers either way.
That’s the beauty of the corporation. It can be sued, as can its managers
and directors, but the owners—the shareholders—are protected. They can’t be
sued in the first place. In England, companies put the word “limited” after
their names. This indicates that the liability of the owners is limited, just the
way it is in U.S. companies. (If anybody ever asks you what the “limited”
means, now you’ve got the answer.)
This is a crucial safeguard of our capitalist system because if shareholders
could be sued whenever a company made a mistake, people like you and me
would be afraid to buy shares and become investors. Why would we want to
run the risk of being held responsible for another big oil spill, or a rat hair in a
hamburger, or the endless variety of mishaps that occur in business every
day? Without limited liability, nobody would want to buy a single share of
stock.Private Companies and Public CompaniesThe vast majority of businesses in this country are private. They are owned by
one person or a small group of people, and more often than not, the ownership
is kept in the family. You can find examples of private companies up and
down the block on every main street in every village and town, and scattered
throughout the cities of America and the world. These are the barbershops,
hair salons, shoe-repair outlets, bicycle shops, baseball-card stores, candy
stores, junk stores, antique stores, second-hand stores, vegetable stands,
bowling alleys, bars, jewelry stores, used-car lots, and local mom-and-pop
restaurants. Most hospitals and universities are private as well.
What makes these businesses private is that the general public can’t invest
in them. If you spend the night at the Sleepy Holler motel, and you’re
impressed with the place and how it’s run, you can’t very well knock on the
manager’s door and demand to be made a partner. Unless you’re related to the
owners, or the owner has a son or daughter who wants to marry you, your
chances of getting a share in this business are close to zero.
Look at the difference when you spend the night at a Hilton or a Marriott
and you’re impressed with those places. You don’t have to knock on any
doors or marry anybody’s son or daughter to become an owner. All you have
to do is call a stockbroker and put in an order to buy shares. Hilton and
Marriott sells their shares in the stock market. Any company that does this is
called a public company.
(Although there are more private companies than public companies in
America, public companies are generally much bigger, which is why most
people work for public companies.)
In a public company, you and your parents, your aunt Sally, or the
neighbors down the block can all buy shares and become owners
automatically. Once you’ve paid your money, you get a certificate, called a
stock certificate, that proves you’re one of the owners. This piece of paper has
real value. You can sell it whenever you want.
A public company is the most democratic institution in the world when it
comes to who can be an owner. It’s an example of true equal opportunity. It
doesn’t matter what color you are, what sex, what religion, what sign of the
zodiac, or what nationality, or whether you have bunions, pimples, or bad
breath.
Even if the chairman of the board of McDonald’s holds a grudge against
you, he can’t stop you from becoming an owner of McDonald’s. The shares
are out there in the stock market, being sold five days a week, six-and-a-half
hours a day, and whoever has the cash and pays the price can buy as many as
he or she wants. What’s true for McDonald’s is also true for the thirteen
thousand other public companies in the United States today—a list that
continues to grow. Public companies are everywhere, and they surround you
from morning to night. You can’t get away from them.
What do Nike, Chrysler, General Motors, the Gap, the Boston Celtics,
United Airlines, Staples, Wendy’s, Coca-Cola, Harley-Davidson, Sunglass
Hut, Marvel Comics, Kodak, Fuji, Wal-Mart, Rubbermaid, Time Warner, and
Winnebago have in common? They’re all public companies. You can play the
alphabet game, A to Z, naming a public company for each letter.
Inside the house, down the street, around the school, and through the malls,
you can’t help running into a large crowd of them. Nearly everything you eat,
wear, read, listen to, ride in, lie on, or gargle with is made by one. Perfume to
penknives, hot tubs to hot dogs, nuts to nail polish are made by businesses
that you can own.
The sheets on your bed might come from Westpoint Stevens; the clock
radio from General Electric; the toilet, sink, and faucets from American
Standard or Eljer; the toothpaste and shampoo from Procter & Gamble; the
razors from Gillette; the lotions from the Body Shop; the toothbrushes from
Colgate-Palmolive.
Put on your Fruit-of-the-Loom underwear, the skirts, and slacks made by
Hagar or Farah that you bought from the Gap or the Limited, sewn from
fabric that came from Galey and Lord out of fibers produced by Du Pont
Chemical. Lace up your Reeboks or the Keds you bought at the Foot Locker
(a division of Woolworth), where you paid the bill with a Citibank VISA
card. Already, you’re involved with dozens of public companies, and you
haven’t gotten to the breakfast table.
There, you’ll find the Cheerios supplied by General Mills; the Pop Tarts
and Eggo waffles supplied by Kelloggs; the Tropicana orange juice by
Seagram, better known for whiskey than for fruit drinks; the Entenmann’s
brought to you by Philip Morris, which also produces Kraft cheese and Oscar
Mayer hot dogs in addition to their Marlboros. Your toast may pop out of a
toaster from Toastmaster, which has been in business since the 1920s and is
still going strong.
The coffeepot, microwave, stove, and refrigerator are made by public
companies, and the larger supermarkets where you or your parents buy the
food is public as well.
Maybe you ride to school in a bus built by General Motors out of steel
from Bethlehem Steel, with the windshield glass coming from PPG
Industries, the tires from Goodyear, and the wheels made by Superior
Industries from aluminum that Superior gets from Alcoa. The gas for the bus
comes from Exxon, Texaco, or one of the many public oil companies. The
bus is insured by Aetna. The bus itself may be owned by Laidlaw, a company
that runs the bus system in many school districts.
The books in your book bag have likely been published by one of the
publicly owned book companies, such as McGraw-Hill, Houghton Mifflin, or
Simon & Schuster, the publishers of the book you’re reading right now.
Simon & Schuster is a division of Paramount, which until recently also owned
Madison Square Garden, the New York Knicks basketball team, and the New
York Rangers hockey team. In 1994, another public company, Viacom,
swallowed Paramount in a takeover.
Takeovers happen all the time in business. On Wall Street, there are more
raids and conquests than you’ll see in any war movie made by Paramount; or
by Universal Studios, a division of MCA that got taken over by the Japanese;
or by MCA itself, which is now a part of Seagram.
Maybe you eat the school lunch that’s cooked on an Amana Radar range
made by Raytheon, the same company that makes the Patriot missile. Or
maybe you drive off campus to the nearest publicly owned hamburger joints:
McDonald’s, Wendy’s, or Burger King, which is a division of Grand
Metropolitan, a British public company. Coke and Pepsi come from public
companies, and Pepsi also owns Taco Bell, Pizza Hut, Frito-Lay, and
Kentucky Fried Chicken, so Pepsi shareholders invest in all of these at once.
Hershey bars, Wrigley’s gum, Tootsie Rolls, and most of the candy in
vending machines are produced by public companies, except for Snickers
candy, made by the Mars family.
When you get home in the afternoon and pick up the phone to call your
boyfriend or girlfriend, you’re using the services of at least one publicly
traded phone company, and if it’s a long-distance call, you’re using three: the
“Baby Bell” (NYNEX, PacTel, etc.) that serves your neighborhood; the long distance carrier (Sprint, MCI, or the original “Ma Bell,” AT&T) that carries
the call out of town; and another “Baby Bell” at the other end of the line.
You can buy stock in any or all of these companies, as well as in the
supporting cast of suppliers of cables and switches, companies that make and
launch telecommunications satellites, and companies that manufacture the
phones themselves.
Your TV set is made by a public company, most likely Japanese. If you’ve
got cable, it’s a good bet your cable company is public. Of the three major
networks, CBS was recently taken over by Westinghouse, NBC is owned by
General Electric and ABC are merging with Disney. Westinghouse, General
Electric and Disney are all public companies, and so is Turner Broadcasting,
which owns and operates CNN and has agreed to merge with Time Warner.
You can invest in jeopardy, Wheel of Fortune, and Oprah by buying
shares in King World, a public company that syndicates those three shows,
among others. You can invest inThe Simpsons or in Cops by buying shares in
Rupert Murdoch’s Newscorp. Newscorp owns Twentieth Century Fox
Television—the Fox network—which in turn owns these two shows.
Nickelodeon, Nick at Night, and MTV belong to Viacom, the parent company
of Blockbuster Video.
Most of the products advertised on TV are made by public companies.
Many of these ads are written and produced by public and agencies such as the
Interpublic Group.
It’s easier to rattle off one thousand names of big-time companies that are
public than it is to name ten that are still private. While there’s no shortage of
mom-and-pop businesses that are private, when you get to the major leagues,
it’s hard to find a company that doesn’t sell shares to the public. As already
mentioned, the Mars company, which makes Mars bars, Milky Way, and
Snickers, is private; so is Levi Strauss, the blue jeans manufacturer. A few
insurance giants—John Hancock, for instance—are mutual companies, but
maybe not for long.
In almost every chain of stores or fast-food outlets you can think of, every
major manufacturer, every company with a brand-name product, you can be
an owner. It’s not as expensive as you might imagine. In fact, for slightly
more than the price of a one-day pass to the Magic Kingdom, you can become
part owner of the entire Disney empire, and for the same price as twenty Big
Macs plus fries, you can become an owner of McDonald’s, along with a lot of
big shots on Wall Street.
No matter how old you are or how many shares of stock you’ll buy in your
lifetime, it’s always a thrill to walk into a McDonald’s, a Toys R Us, or a
Circuit City and watch the customers lining up to buy the merchandise,
knowing that you’ve got a piece of the action and that some smidgeon of the
profits will end up in your pocket. When you buy a VCR from Circuit City or
rent a video from Blockbuster, if you’re an owner of either of these
companies, you’re actually spending money for your own benefit.
This is an important part of our way of life that the Founding Fathers
couldn’t have dreamed up. From sea to shining sea, over 50 million men,
women, and children have become part owners in thirteen thousand different
public companies. Being a shareholder is the greatest method ever invented to
allow masses of people to participate in the growth and prosperity of a
country. It’s a two-way street. When a company sells shares, it uses the
money to open new stores, or build new factories, or upgrade its merchandise,
so it can sell more products to more customers and increase its profits. And as
the company gets bigger and more prosperous, its shares become more
valuable, so the investors are rewarded for putting their money to such good
use.
Meanwhile, a company that prospers can afford to give pay raises to its
workers and move them up the line to bigger and more important jobs. It will
also pay more taxes on its increased profits so the government will have more
money to spend on schools, roads, and other projects that benefit society. This
whole beneficial chain of events begins when people like you invest in a
company.
Investors are the first link in the capitalist chain. The more money you can
manage to save, and the more shares you buy in companies, the better off
you’re likely to be, because if you pick your companies wisely and don’t get
impatient, your shares will be worth a lot more in the future than they were on
the day you bought them.
company. Most business in the world is done by companies. The word
“company” comes from a Latin word that means “companion.”
The formal name for a company is “corporation.” Corporation comes from
“corpus,” another Latin word, meaning “body,” in this case, a body of people
who join together to conduct business. “Corpse” also comes from “corpus,”
although this has nothing to do with the subject at hand, since corpses are
unable to do business.
To form a corporation is easy. All it takes is paying a small fee and filing a
few papers in the state in which you want to maintain a legal address.
Delaware is the most popular choice because the laws there are favorable to
business, but thousands of new corporations are formed every year in every
state. Whenever you see an “inc.” attached to the end of the name of a
business, it means that company has filed the papers to become a corporation.
“Inc.” is short for “incorporated.”
In the eyes of the law, a corporation is a separate individual that can be
punished for bad behavior, usually by the imposition of a fine. That’s the
main reason owners of a business go to the trouble of getting incorporated. If
they do something wrong and they get sued, the corporation takes the rap and
they get off the hook. Imagine if you borrowed your parents’ car without
permission and ran it into a tree, how much better you’d feel if you were
incorporated.
Do you remember the Exxon Valdez disaster in Alaska, when an oil tanker
ran aground and spilled 11 million gallons of oil into Prince William Sound?
This created a huge mess that took months to clean up. The tanker belonged
to Exxon, America’s third-largest company. At the time, Exxon had hundreds
of thousands of shareholders who were part owners of the business.
If Exxon hadn’t been incorporated, all those people could have gotten sued
individually, and lost their life savings on account of an oil spill that wasn’t
their fault. Even if Exxon were found innocent, they would have had to pay
the legal bills to defend themselves—in this country you’re innocent until
proven guilty, but you pay the lawyers either way.
That’s the beauty of the corporation. It can be sued, as can its managers
and directors, but the owners—the shareholders—are protected. They can’t be
sued in the first place. In England, companies put the word “limited” after
their names. This indicates that the liability of the owners is limited, just the
way it is in U.S. companies. (If anybody ever asks you what the “limited”
means, now you’ve got the answer.)
This is a crucial safeguard of our capitalist system because if shareholders
could be sued whenever a company made a mistake, people like you and me
would be afraid to buy shares and become investors. Why would we want to
run the risk of being held responsible for another big oil spill, or a rat hair in a
hamburger, or the endless variety of mishaps that occur in business every
day? Without limited liability, nobody would want to buy a single share of
stock.Private Companies and Public CompaniesThe vast majority of businesses in this country are private. They are owned by
one person or a small group of people, and more often than not, the ownership
is kept in the family. You can find examples of private companies up and
down the block on every main street in every village and town, and scattered
throughout the cities of America and the world. These are the barbershops,
hair salons, shoe-repair outlets, bicycle shops, baseball-card stores, candy
stores, junk stores, antique stores, second-hand stores, vegetable stands,
bowling alleys, bars, jewelry stores, used-car lots, and local mom-and-pop
restaurants. Most hospitals and universities are private as well.
What makes these businesses private is that the general public can’t invest
in them. If you spend the night at the Sleepy Holler motel, and you’re
impressed with the place and how it’s run, you can’t very well knock on the
manager’s door and demand to be made a partner. Unless you’re related to the
owners, or the owner has a son or daughter who wants to marry you, your
chances of getting a share in this business are close to zero.
Look at the difference when you spend the night at a Hilton or a Marriott
and you’re impressed with those places. You don’t have to knock on any
doors or marry anybody’s son or daughter to become an owner. All you have
to do is call a stockbroker and put in an order to buy shares. Hilton and
Marriott sells their shares in the stock market. Any company that does this is
called a public company.
(Although there are more private companies than public companies in
America, public companies are generally much bigger, which is why most
people work for public companies.)
In a public company, you and your parents, your aunt Sally, or the
neighbors down the block can all buy shares and become owners
automatically. Once you’ve paid your money, you get a certificate, called a
stock certificate, that proves you’re one of the owners. This piece of paper has
real value. You can sell it whenever you want.
A public company is the most democratic institution in the world when it
comes to who can be an owner. It’s an example of true equal opportunity. It
doesn’t matter what color you are, what sex, what religion, what sign of the
zodiac, or what nationality, or whether you have bunions, pimples, or bad
breath.
Even if the chairman of the board of McDonald’s holds a grudge against
you, he can’t stop you from becoming an owner of McDonald’s. The shares
are out there in the stock market, being sold five days a week, six-and-a-half
hours a day, and whoever has the cash and pays the price can buy as many as
he or she wants. What’s true for McDonald’s is also true for the thirteen
thousand other public companies in the United States today—a list that
continues to grow. Public companies are everywhere, and they surround you
from morning to night. You can’t get away from them.
What do Nike, Chrysler, General Motors, the Gap, the Boston Celtics,
United Airlines, Staples, Wendy’s, Coca-Cola, Harley-Davidson, Sunglass
Hut, Marvel Comics, Kodak, Fuji, Wal-Mart, Rubbermaid, Time Warner, and
Winnebago have in common? They’re all public companies. You can play the
alphabet game, A to Z, naming a public company for each letter.
Inside the house, down the street, around the school, and through the malls,
you can’t help running into a large crowd of them. Nearly everything you eat,
wear, read, listen to, ride in, lie on, or gargle with is made by one. Perfume to
penknives, hot tubs to hot dogs, nuts to nail polish are made by businesses
that you can own.
The sheets on your bed might come from Westpoint Stevens; the clock
radio from General Electric; the toilet, sink, and faucets from American
Standard or Eljer; the toothpaste and shampoo from Procter & Gamble; the
razors from Gillette; the lotions from the Body Shop; the toothbrushes from
Colgate-Palmolive.
Put on your Fruit-of-the-Loom underwear, the skirts, and slacks made by
Hagar or Farah that you bought from the Gap or the Limited, sewn from
fabric that came from Galey and Lord out of fibers produced by Du Pont
Chemical. Lace up your Reeboks or the Keds you bought at the Foot Locker
(a division of Woolworth), where you paid the bill with a Citibank VISA
card. Already, you’re involved with dozens of public companies, and you
haven’t gotten to the breakfast table.
There, you’ll find the Cheerios supplied by General Mills; the Pop Tarts
and Eggo waffles supplied by Kelloggs; the Tropicana orange juice by
Seagram, better known for whiskey than for fruit drinks; the Entenmann’s
brought to you by Philip Morris, which also produces Kraft cheese and Oscar
Mayer hot dogs in addition to their Marlboros. Your toast may pop out of a
toaster from Toastmaster, which has been in business since the 1920s and is
still going strong.
The coffeepot, microwave, stove, and refrigerator are made by public
companies, and the larger supermarkets where you or your parents buy the
food is public as well.
Maybe you ride to school in a bus built by General Motors out of steel
from Bethlehem Steel, with the windshield glass coming from PPG
Industries, the tires from Goodyear, and the wheels made by Superior
Industries from aluminum that Superior gets from Alcoa. The gas for the bus
comes from Exxon, Texaco, or one of the many public oil companies. The
bus is insured by Aetna. The bus itself may be owned by Laidlaw, a company
that runs the bus system in many school districts.
The books in your book bag have likely been published by one of the
publicly owned book companies, such as McGraw-Hill, Houghton Mifflin, or
Simon & Schuster, the publishers of the book you’re reading right now.
Simon & Schuster is a division of Paramount, which until recently also owned
Madison Square Garden, the New York Knicks basketball team, and the New
York Rangers hockey team. In 1994, another public company, Viacom,
swallowed Paramount in a takeover.
Takeovers happen all the time in business. On Wall Street, there are more
raids and conquests than you’ll see in any war movie made by Paramount; or
by Universal Studios, a division of MCA that got taken over by the Japanese;
or by MCA itself, which is now a part of Seagram.
Maybe you eat the school lunch that’s cooked on an Amana Radar range
made by Raytheon, the same company that makes the Patriot missile. Or
maybe you drive off campus to the nearest publicly owned hamburger joints:
McDonald’s, Wendy’s, or Burger King, which is a division of Grand
Metropolitan, a British public company. Coke and Pepsi come from public
companies, and Pepsi also owns Taco Bell, Pizza Hut, Frito-Lay, and
Kentucky Fried Chicken, so Pepsi shareholders invest in all of these at once.
Hershey bars, Wrigley’s gum, Tootsie Rolls, and most of the candy in
vending machines are produced by public companies, except for Snickers
candy, made by the Mars family.
When you get home in the afternoon and pick up the phone to call your
boyfriend or girlfriend, you’re using the services of at least one publicly
traded phone company, and if it’s a long-distance call, you’re using three: the
“Baby Bell” (NYNEX, PacTel, etc.) that serves your neighborhood; the long distance carrier (Sprint, MCI, or the original “Ma Bell,” AT&T) that carries
the call out of town; and another “Baby Bell” at the other end of the line.
You can buy stock in any or all of these companies, as well as in the
supporting cast of suppliers of cables and switches, companies that make and
launch telecommunications satellites, and companies that manufacture the
phones themselves.
Your TV set is made by a public company, most likely Japanese. If you’ve
got cable, it’s a good bet your cable company is public. Of the three major
networks, CBS was recently taken over by Westinghouse, NBC is owned by
General Electric and ABC are merging with Disney. Westinghouse, General
Electric and Disney are all public companies, and so is Turner Broadcasting,
which owns and operates CNN and has agreed to merge with Time Warner.
You can invest in jeopardy, Wheel of Fortune, and Oprah by buying
shares in King World, a public company that syndicates those three shows,
among others. You can invest inThe Simpsons or in Cops by buying shares in
Rupert Murdoch’s Newscorp. Newscorp owns Twentieth Century Fox
Television—the Fox network—which in turn owns these two shows.
Nickelodeon, Nick at Night, and MTV belong to Viacom, the parent company
of Blockbuster Video.
Most of the products advertised on TV are made by public companies.
Many of these ads are written and produced by public and agencies such as the
Interpublic Group.
It’s easier to rattle off one thousand names of big-time companies that are
public than it is to name ten that are still private. While there’s no shortage of
mom-and-pop businesses that are private, when you get to the major leagues,
it’s hard to find a company that doesn’t sell shares to the public. As already
mentioned, the Mars company, which makes Mars bars, Milky Way, and
Snickers, is private; so is Levi Strauss, the blue jeans manufacturer. A few
insurance giants—John Hancock, for instance—are mutual companies, but
maybe not for long.
In almost every chain of stores or fast-food outlets you can think of, every
major manufacturer, every company with a brand-name product, you can be
an owner. It’s not as expensive as you might imagine. In fact, for slightly
more than the price of a one-day pass to the Magic Kingdom, you can become
part owner of the entire Disney empire, and for the same price as twenty Big
Macs plus fries, you can become an owner of McDonald’s, along with a lot of
big shots on Wall Street.
No matter how old you are or how many shares of stock you’ll buy in your
lifetime, it’s always a thrill to walk into a McDonald’s, a Toys R Us, or a
Circuit City and watch the customers lining up to buy the merchandise,
knowing that you’ve got a piece of the action and that some smidgeon of the
profits will end up in your pocket. When you buy a VCR from Circuit City or
rent a video from Blockbuster, if you’re an owner of either of these
companies, you’re actually spending money for your own benefit.
This is an important part of our way of life that the Founding Fathers
couldn’t have dreamed up. From sea to shining sea, over 50 million men,
women, and children have become part owners in thirteen thousand different
public companies. Being a shareholder is the greatest method ever invented to
allow masses of people to participate in the growth and prosperity of a
country. It’s a two-way street. When a company sells shares, it uses the
money to open new stores, or build new factories, or upgrade its merchandise,
so it can sell more products to more customers and increase its profits. And as
the company gets bigger and more prosperous, its shares become more
valuable, so the investors are rewarded for putting their money to such good
use.
Meanwhile, a company that prospers can afford to give pay raises to its
workers and move them up the line to bigger and more important jobs. It will
also pay more taxes on its increased profits so the government will have more
money to spend on schools, roads, and other projects that benefit society. This
whole beneficial chain of events begins when people like you invest in a
company.
Investors are the first link in the capitalist chain. The more money you can
manage to save, and the more shares you buy in companies, the better off
you’re likely to be, because if you pick your companies wisely and don’t get
impatient, your shares will be worth a lot more in the future than they were on
the day you bought them.
No comments:
Post a Comment