Well I don't understand why you believe that people who played the stock market and merely invested in a company based on it's employee-churned profit growth and CEO contrived business success would be more entitled to a portion of the profits that they played no direct part in making other than their initial investment per purchase of said stock.
another name for these shareholders is "owners"
they own the corporation, and they own the profits that corporation generates
unless the corporation (wisely) sets aside a portion of earnings for the employees, the employees would have no entitlement to those profits, which are rightfully the owners/shareholders
The reason why a company offers stock is so the company can profit *from* the sale of stock.
actually, the reason why stock is sold is usually to capitalize the corporation
there are instances where a privately held company - which is already capitalized - will initiare a public offering of stock such that the private owners can recover some of the monies they have invested (and hopefully some equity resulting from the increased value of the corporation)
that increase in equity would constitute a "profit" for the seller of the stock, but the notice that the corporation does not enjoy a profit from that sale of equity. only if the corporation itself owned stock could it directly realize a potential profit from the sale of those shares
If the company pays *more* to their stock-holders than their stock-holders ever invest over the course of time then doesn't that defeat the purpose?
actually, that is the purpose. why would anyone invest in a corporation's stock with the intent of realizing upon its sale less than they have invested?
Thus - dividend payouts are always controlled, capped or otherwise limited and not all stock-portions are for public-investment. Much is reserved for the use of the company itself.
if you are speaking of retained earnings, which were elected by the Board of Directors not to be distributed as dividends, then we are in agreement
but recognize, the profits not distributed as dividends become the capital of the company, enhancing its balance sheet/net worth. that usually enhances the perceived value of the underlying stock of the corporation
(When a stock-holder gains a substantial amount of profits they are no longer a mere mouse in the game of the market - they are lifted to a different level in which their opinions and thoughts about the business are considered . . . this is *no longer* a routine "market shareholder position" - this is beyond that and this is no longer related to my point)
i am guessing you are distinguishing between an active and a passive investor here, so we can agree that this discussion focuses on the passive investor
Aside that - those in the stock market don't receive all of a company's excessive profits as dividends - they purchase the stock knowing that they *might* receive a set % of profit as a dividend. Their amount fluctuates according to profit, growth, liquidity, overall market stability and other factors. . . none of which they have a direct hand in - the only money they invest is their purchase of said stock.
but what we are addressing is the distribution of profits to the corporation's employees instead of to the corporation's stockholders (aka 'the owners')
if the profits were to be distributed to the employees instead of as dividends to the shareholds, then you would be taking the profits of the owners and giving them instead to the employees. the employees have no 'right' to those profits (unless this distribution of corporate profits has been agreed to by management)
the amount given over to the employees is taken from the value the stockholders/owners would otherwise have rightfully enjoyed
For most investors their true interest is *not* the company's business-goals and purpose but it is the *company's* value and a very self-centered "how much will this profit *me*"
the investors are usually making a calculated investment, based on the expected return they will realize from the investment. the profits you do not give to the owners of the corporation to instead hand over to the employees diminishes the return those investors would realize
if the business is engaging in practices that increase or decrease risk to the investor, that would be factored into their decision to buy/sell corporate stock, based on the level of risk/exposure they were willing to assume
and there are a number of investors who do discriminate among corporations when building their portfolios. the nature of the business and the business operations should be of critical concern to an investor
Unlike the employee - not all - but there are many which *do* care about the company's bottom line, reputation and overall success, not just how much they might profit from it.
certainly we would expect a rational employee to be concerned about the profitability and longevity of its employer corporation. they have selfish reason for being so concerned. an unprofitable business will likely be considering cutbacks, in employee numbers/wages/bonuses/hours/perks. it is in the employee's self interest to want the corporation to do well enough to continue to fairly compensate the employee for his/her work
but notice that if you substitute the word "compensation" for "profit", both the investor and the employee are looking for the same result ... they both are interested because of what it will yield for them
Without these employees the company/business would not exist ...
with few exceptions, employees are fungible
you have an employee who does not like that they are not adequately compensated - to continue your theme - because they did not get their perceived "fair share" of the corporation's profits. either that employee sucks it up or they leave. and if they leave, they are quickly replaced ... especially in this present economy
... - while stock-market investors are somewhat important - they are not necessary and many argue that they aren't actually beneficial to the company *at all*
we disagree here. probably because of our fundamental differences in opinion about the purpose of stock sales. unless one can fund the corporation out of their wallet, or is able to leverage the funds they do have to secure a business loan to fund operations, the corporation will necessarily have to sell stock to capitalize the business' operations.
in those instances, if there are inadequate investors, then there can be no corporation (or expanison of the corporation or salvaging a corporation bleeding capital)
Also, Not all companies reward their stock-investors with dividends, too boot; for the majority of stocks the only way to make money is to buy low/sell high - and literally play the game. And this isn't paid for *by* the company - this is paid for *by* other investors - the company in a buy/sell ONLY stock is merely profiting a portion from each sale of stock.
if the corporation had the profits avilable and chose not to make distribution to the shareholders, then those surplus profits would be retained earnings, which would enhance the corporation's financial statement. those retained earnings would make the corporation's value increase dollar for dollar of retained earnings. that should (ordinarily) force the corporation's stock price upward
so, if instead of keeping the surplus profits as retained earnings, and distributing them to the employees, the enhancement of the stock value would be eliminated because there would be no retained earnings to bolster the stock value. that distribution would be treated as an expense of operations, which expense would reduce the corporation's profitability
Aside that - employees are always offered a company-stock option that they can invest in if they wish - ...
not always. some corporations are privaely/closely held. all but one NFL team is closely held, as an example. so, by distributing shares to the employees, they would lose their advantages of owning closely held corporate stock
... which often isn't from the market-pool but the reserved-pool of stocks that the company sets aside for itself.
sometimes corporation buy back shares of their stock when they believe the shares are being sold below value and the corporation has the liquidity to invest in its own shares. other times, the corporation will distribute unsold shares, or will authorize the sale of additional shares (the latter of which dilutes the value of each previously owned share)
Thus - I still stand firm and always will in my belief that the employees which keep a company going, make all the money and magic happen, ...
it is my belief that you are standing firmly in quickstand with that unshakable stance
the employees certainly are one of the essential ingredients to the corporations ability to generate a profit, but there are other factors, such as the leadership of the corporation, taking/keeping it in a profitable arena
... should be respected and given the highest reward and appreciation from their employers - without employees working hard - there would be no company, there would be no profit in stocks.
employees are plentiful. that employee who is no longer satisfied with the agreed upon compensation they receive is entitled to and should walk away from the corporation if they believe they can realize a better compensation elsewhere. but as i said earlier, the reality is employees are fungible. there are plenty - estimated these days at 40 to 100 applicants for every open position. someone would be found to do the job that disgruntled former employee left ... because they did not get the share of corporate profits they wrongly felt they were entitled to enjoy
Often when this "giving back to the employee" is done it's called a bonus, by the way, which many profitable companies fully believe in and give to their employees as a thank you for their hard work.
i doubt that every employee performed well enough to deserve a bonus, from my years in the work force prior to retirement. many did only enough to get by. i don't see that as bonus-worthy; in fact, it may somewhat demean the bonus the deserving realize when they see the slackers enjoy the same bonus result
that said, i would surmise that a bonus is often the best money an employer can spend to enhance the operation. that opportunity to qualify for and receive a bonus, usually just a few percent of their annual income, drives many employees to better than average performance. which enhanced performance may likely not have been achieved but for the bonus. so, for a small percentage of its payroll expense, the corporation can realize substantial increases in performance by its staff