Enticing equity

The joint stock companies formed to finance seafaring adventures in the 1500s were such a success (not least because of the vast riches plundered by buccaneers) that the concept was rapidly extended to more mundane ventures. The principle is simple. When a large number of investors contribute capital, their individual risk is spread, the company receives the finance it needs, but the investors still share the rewards. These shareholders are actually part owners of the company, but they delegate the day-to-day running of the business to the directors. Shareholders with large blocks of shares, or acting in collusion with other investors, exercise influence or control through their ability to hire and fire directors – which at least ...

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