Someone suggested to me that Olympus shareholders should sue the company in view of recent events. (search Olympus, fraud). I will get back to Olympus, but first some general background on companies in general.
Who Pays?
If a law suit is filed and against a company...who is actually being sued and why?
It is the shareholders (in terms of people) who are actually being sued when a claim is made against a company. The wealth of the company is all owned by the shareholders, and if some of this wealth is paid out as a result of legal action, it is the shareholders who as a result, become less wealthy.
This may not seem fair, as whatever the company did that was wrong was done by people who work at the company, not by the shareholders. However office holders (CEOs, Presidents, Vice Presidents, Boards, are not the company, even though it often seems that way. These people operate the company on behalf of the shareholders. Ok- sometimes these same people are also shareholders, but the important point is that if action is sought against a company, the people who work in any capacity at the company will only be 'paying' as a result of the claim to the extent that they are shareholders, and made to 'pay' exactly in the same manner as all other shareholders. Of course the 'payment' of each shareholder is limited, at most, to the value of the shares they hold.
Ok, so if it is officers of the company who make the companies decisions, why is it that shareholders are the ones to pay out? In the end, there are two available arguments as to why this can make sense:
1) If the company actually made financial gain from whatever wrong doing took place, it is in theory the shareholders, as the company owners, who have profited from that gain.
2) The shareholders are responsible for appointing the board, who in turn appoint the other officers of the company. So in the end, 'the buck stops' with the shareholders as far as choosing the people who made the bad decisions of the company.
Who is really to blame?
If it is the company who is the subject of a lawsuit, then it will effectively be the shareholders who pay any damages. But what if it really isn't the shareholders fault or the shareholders gain?
While in theory every action of a company is done under guidance of a shareholder elected board for outcomes to the benefit of shareholders, in practice the shareholders or the board may be deceived. If there was no negligence by the shareholders or board then it should not really be the company that is the subject of legal action, but rather the officers of the company or individuals within the company who caused the problems who are the subject of legal action. Of course, such individuals are a less attractive target as the capacity to pay damages is less, so it will generally be argued that no only are the individuals at fault, but the framework provided by the company should have prevented the problem, so, in the end, the shareholders also should pay.
A further reality is that senior staff of public companies are almost always covered by professional indemnity insurance which protects against unintended transgressions so there are cases where action against the company officers can call on insurance the achieve substantial payouts. Of course, the shareholders also lose in this case as it is the company paying for the insurance of these officers and premiums will rise substantially following any payout!
What about Olympus?
In the case of Olympus, there appear to be no other victims that the shareholders. Shareholders suing the company makes no sense as the shareholders are the ones funding any payout. They would have to pay themselves!
It also seems a strange case in that so far it has not emerged that the people employed by Olympus who were responsible have actually profited themselves, beyond delaying a loss of face. It may emerge that bonuses and even tenure were protected but there is little to suggest the funds were siphoned out of Olympus for personal gain.
Friday, November 25, 2011
Tuesday, November 8, 2011
XX billions dollars slashed from the stock market! Is this real?
You will quite often hear that either across the entire stock market, XX billion dollars has been slashed from value of the stock market in a single day!
Or it can also happen with one individual stock, where the share price has fallen, for example, 25% in a single day. The headlines report that the company value has thus fallen by 25% in that day!
This is really a distortion. This often can take place with no such change in real value has occurring at all.
Common practice is to speak of company 'market value' by taking the price a share last sold for, and multiplying this by the number of shares.
This can give a very distorted view when things change.
Imagine a company with a share price of $100. If I own one share and sell it for $1, then by this same calculation, I have caused all investors to lose 99% of the value of the asset they hold. Of course these other shareholders have only really lost all this if they also sell their shares for $1 because I sold my share for $1.
In reality the price will only stay depressed if others also decide to sell, but all it takes is a small percentage of shareholders to decide to dump their stock to force a much lower price. If most shareholders still have a view the price is closer to original price, then nothing much has really changed apart from the 'market cap' figure. Every sale requires not just a seller, but a buyer. On a day of bad news buyers may be scarce and can offer really low prices in the hope that someone will need the money and be forced to sell. It is possible for the price to move a very significant amount on the sentiment of a very small amount of people. Sometimes in these situations the company will still be paying a dividend just as before so while there can be very few buyers for a while if you keep the stock nothing has changed. Note that those who do buy, buy because they also think the stock is worth more than the price they are paying.
Note also that the company itself is not really affected by the share price, unless they are in the rare situation of planning to offer more shares, or planning to issue shares, using them as currency to buy another company. In normal day to day business, share price has no impact on the company itself.
Further, a change in the share price may have little or no impact on the cost of buying the company. Certainly a lower price means some shareholders were prepared to sell for less, but how many shareholders? In a negative mood some will sell shares at any price (and without a buyer who conversely feels the price is good no sale will occur) but at this point all you are learning is the price the most negative of all stockholders will sell for, not the price the vast majority will sell
at. Even the person who bought this 'last trade' clearly expects a profit so now will only sell for a higher price.
Next time I am on this topic I will look at some the triggers for misleading falls (and rises) in share prices.
Or it can also happen with one individual stock, where the share price has fallen, for example, 25% in a single day. The headlines report that the company value has thus fallen by 25% in that day!
This is really a distortion. This often can take place with no such change in real value has occurring at all.
Common practice is to speak of company 'market value' by taking the price a share last sold for, and multiplying this by the number of shares.
This can give a very distorted view when things change.
Imagine a company with a share price of $100. If I own one share and sell it for $1, then by this same calculation, I have caused all investors to lose 99% of the value of the asset they hold. Of course these other shareholders have only really lost all this if they also sell their shares for $1 because I sold my share for $1.
In reality the price will only stay depressed if others also decide to sell, but all it takes is a small percentage of shareholders to decide to dump their stock to force a much lower price. If most shareholders still have a view the price is closer to original price, then nothing much has really changed apart from the 'market cap' figure. Every sale requires not just a seller, but a buyer. On a day of bad news buyers may be scarce and can offer really low prices in the hope that someone will need the money and be forced to sell. It is possible for the price to move a very significant amount on the sentiment of a very small amount of people. Sometimes in these situations the company will still be paying a dividend just as before so while there can be very few buyers for a while if you keep the stock nothing has changed. Note that those who do buy, buy because they also think the stock is worth more than the price they are paying.
Note also that the company itself is not really affected by the share price, unless they are in the rare situation of planning to offer more shares, or planning to issue shares, using them as currency to buy another company. In normal day to day business, share price has no impact on the company itself.
Further, a change in the share price may have little or no impact on the cost of buying the company. Certainly a lower price means some shareholders were prepared to sell for less, but how many shareholders? In a negative mood some will sell shares at any price (and without a buyer who conversely feels the price is good no sale will occur) but at this point all you are learning is the price the most negative of all stockholders will sell for, not the price the vast majority will sell
at. Even the person who bought this 'last trade' clearly expects a profit so now will only sell for a higher price.
Next time I am on this topic I will look at some the triggers for misleading falls (and rises) in share prices.
Monday, November 7, 2011
Introducing duoculturalism
I would like to introduce the concept of 'duoculturalism'.
I use this term to describe a society where individuals identify with a both a traditional culture (as in multiculturalism) and also a common shared cultural of the current overall society in which they currently reside.
The concept of duoculturalism is that each individual has both one (or more) traditional cultural heritage, and in additional a modern contemporary culture. The further step is that celebration of culture should include both the traditional culture, and a more widely inclusive contemporary culture that extends at least to a national level.
The difference from Multiculturalism.
Modern societies consist of people of diverse ethnic, religious and cultural backgrounds. Multiculturalism focuses on celebrating and embracing those traditional backgrounds. Multiculturalism celebrates the diversity. The difference with duoculturalism is to still celebrate the diversity, but to additionally celebrate the new common culture of today's world that binds across all traditional cultures. Duoculturalism is making an additional statement that the world is rapidly changing and we all on a journey together. We celebrate our past and the cultures that made us and make us diverse, but we celebrate together with the common future we face together.
For example, consider modern Britain. Today's multicultural British society include a large number of sub cultures, but lets consider a 'British Indian' (see Wikipedia for perspective of another author). This is a widely accepted term, and I would suggest a term already reflecting the reality of 'duoculturalism'. It is important not just hat the 'British Indian' has an Indian heritage, but also that they are part of modern Britain. The point of duoculturalism is to keep this duality in mind for all groups. If in (for example) Britain, an area with a high concentration of immigrants from, for example, Poland, is not a 'Polish area', but a 'British Polish' area. The people chose, and were accepted, to live in Britain and that becomes part of their identity.
What about the 'Natives'?
Staying with Britain for now, where does this idea leave the traditional 'British'? The question arises that, if all your ancestors have lived in Britain, does that mean you miss out and only have one culture?
Once the concept is understood correctly, the answer becomes clearly 'no, no one misses out'. A key concept of duoculturalism is that the world of today is different from the world of anyone's heritage. Today's Britain has the internet, mobile phones, twitter, reality TV and a vastly different mix of people people than the Britain of only 50 years ago. A person who's heritage is solely in Britain can rest assured that their ancestors lived in a very different world, and it is still a world worthy of celebration. The concept of duoculturalism is that every one now lives and a new and different world than any one in the past lived in, and that produces a new and unique culture we all share. But everyone also has a heritage and a past and in every case their heritage is a world different than the world we share today.
Why 'Duo'? Why stop at two cultures?
An objection could be raised that many people already have more than one ancestral background, with for example, living in New York with a Chinese mother and an African American father? The answer is again to understand that the concept is 'a heritage, and a today'. The heritage may be a complex mixture, but it is still a heritage. Everyone has a heritage, which may be very diverse, and everyone has a today that we all share. Celebrate the diversity of the heritage, and be bound together in sharing the common today.
Culture as a product of Environment
Cultures will normally reflect not only customs that were simply adopted by society without reason. Far more often customs will reflect the environment where the culture emerged. Clothes of a culture reflect local weather, terrain and conditions. Foods associated with a culture will normally reflect the foods that were available and styles of cooking will suit climate and other needs of the original environment. But consider how different the environment of traditional cultures are to the needs of today. Modern transport gives us access to foods from all over the world no matter where we are. Modern refrigeration eliminates the need for curries or other methods as food preservation.
An important concept is to recognise that the modern world has changed so much, that the human environment of the last 100 years has produced a greater change than the change of moving from culture to culture 100 years ago. Consider the Europeans discovering Japan or China. They were amazed, but nothing like the amazement someone from 100 years ago would experience moving to the world of today. All cultures 100 years ago had more in common with each other, than any of them has with the world of today.
Today's world would eventually give rise to a whole new culture, if it does not change before the new culture has a chance to become established. New differences between countries would emerge again, which is why a 'British Indian' is different from 'German Indian' or an 'Australian Indian'. Each of these has both a new and an old culture to celebrate. Just as a person of Indian descent living in India has both a modern culture and a traditional culture to celebrate.
How does Duoculturalism improve on Multiculturalism?
1. Inclusion
Multiculturalism tends not to automatically recognise difference between the past and today. This can easily create and 'us an them' mentality between immigrants seen as bringing a new culture, and long term inhabitants who see their traditions as under threat. Duoculturalism attempts to recognise that there is change, from technology and from other sources, and that no one is living in the world of their heritage. I suggest that while multiculturalism preaches tolerance and celebration of diversity, in failing to recognise what we all have in common it can lead to division and by appearing to exclude those seen under multiculturalism as having a different culture, can at the same time foster misunderstandings and leaving some people feel excluded. The lack of a concept of a separation of 'tradition' and 'today' can actually further divisions while instructing in tolerance.
2. The lack of unity
People are by nature tribal. Multiculturalism seems to say 'rise above your tribal nature', where as duoculturalism is saying yes we are all different, but also look at how we are now the same. By also celebrating the modern society we all share, there is a focus on celebrating how today we are part of one diverse tribe. Each nation with a common team at the Olympics, not a team for each subculture. The unity of celebrating this common 'today' is additional element to celebrating difference.
I use this term to describe a society where individuals identify with a both a traditional culture (as in multiculturalism) and also a common shared cultural of the current overall society in which they currently reside.
The concept of duoculturalism is that each individual has both one (or more) traditional cultural heritage, and in additional a modern contemporary culture. The further step is that celebration of culture should include both the traditional culture, and a more widely inclusive contemporary culture that extends at least to a national level.
The difference from Multiculturalism.
Modern societies consist of people of diverse ethnic, religious and cultural backgrounds. Multiculturalism focuses on celebrating and embracing those traditional backgrounds. Multiculturalism celebrates the diversity. The difference with duoculturalism is to still celebrate the diversity, but to additionally celebrate the new common culture of today's world that binds across all traditional cultures. Duoculturalism is making an additional statement that the world is rapidly changing and we all on a journey together. We celebrate our past and the cultures that made us and make us diverse, but we celebrate together with the common future we face together.
For example, consider modern Britain. Today's multicultural British society include a large number of sub cultures, but lets consider a 'British Indian' (see Wikipedia for perspective of another author). This is a widely accepted term, and I would suggest a term already reflecting the reality of 'duoculturalism'. It is important not just hat the 'British Indian' has an Indian heritage, but also that they are part of modern Britain. The point of duoculturalism is to keep this duality in mind for all groups. If in (for example) Britain, an area with a high concentration of immigrants from, for example, Poland, is not a 'Polish area', but a 'British Polish' area. The people chose, and were accepted, to live in Britain and that becomes part of their identity.
What about the 'Natives'?
Staying with Britain for now, where does this idea leave the traditional 'British'? The question arises that, if all your ancestors have lived in Britain, does that mean you miss out and only have one culture?
Once the concept is understood correctly, the answer becomes clearly 'no, no one misses out'. A key concept of duoculturalism is that the world of today is different from the world of anyone's heritage. Today's Britain has the internet, mobile phones, twitter, reality TV and a vastly different mix of people people than the Britain of only 50 years ago. A person who's heritage is solely in Britain can rest assured that their ancestors lived in a very different world, and it is still a world worthy of celebration. The concept of duoculturalism is that every one now lives and a new and different world than any one in the past lived in, and that produces a new and unique culture we all share. But everyone also has a heritage and a past and in every case their heritage is a world different than the world we share today.
Why 'Duo'? Why stop at two cultures?
An objection could be raised that many people already have more than one ancestral background, with for example, living in New York with a Chinese mother and an African American father? The answer is again to understand that the concept is 'a heritage, and a today'. The heritage may be a complex mixture, but it is still a heritage. Everyone has a heritage, which may be very diverse, and everyone has a today that we all share. Celebrate the diversity of the heritage, and be bound together in sharing the common today.
Culture as a product of Environment
Cultures will normally reflect not only customs that were simply adopted by society without reason. Far more often customs will reflect the environment where the culture emerged. Clothes of a culture reflect local weather, terrain and conditions. Foods associated with a culture will normally reflect the foods that were available and styles of cooking will suit climate and other needs of the original environment. But consider how different the environment of traditional cultures are to the needs of today. Modern transport gives us access to foods from all over the world no matter where we are. Modern refrigeration eliminates the need for curries or other methods as food preservation.
An important concept is to recognise that the modern world has changed so much, that the human environment of the last 100 years has produced a greater change than the change of moving from culture to culture 100 years ago. Consider the Europeans discovering Japan or China. They were amazed, but nothing like the amazement someone from 100 years ago would experience moving to the world of today. All cultures 100 years ago had more in common with each other, than any of them has with the world of today.
Today's world would eventually give rise to a whole new culture, if it does not change before the new culture has a chance to become established. New differences between countries would emerge again, which is why a 'British Indian' is different from 'German Indian' or an 'Australian Indian'. Each of these has both a new and an old culture to celebrate. Just as a person of Indian descent living in India has both a modern culture and a traditional culture to celebrate.
How does Duoculturalism improve on Multiculturalism?
1. Inclusion
Multiculturalism tends not to automatically recognise difference between the past and today. This can easily create and 'us an them' mentality between immigrants seen as bringing a new culture, and long term inhabitants who see their traditions as under threat. Duoculturalism attempts to recognise that there is change, from technology and from other sources, and that no one is living in the world of their heritage. I suggest that while multiculturalism preaches tolerance and celebration of diversity, in failing to recognise what we all have in common it can lead to division and by appearing to exclude those seen under multiculturalism as having a different culture, can at the same time foster misunderstandings and leaving some people feel excluded. The lack of a concept of a separation of 'tradition' and 'today' can actually further divisions while instructing in tolerance.
2. The lack of unity
People are by nature tribal. Multiculturalism seems to say 'rise above your tribal nature', where as duoculturalism is saying yes we are all different, but also look at how we are now the same. By also celebrating the modern society we all share, there is a focus on celebrating how today we are part of one diverse tribe. Each nation with a common team at the Olympics, not a team for each subculture. The unity of celebrating this common 'today' is additional element to celebrating difference.
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