In a message dated 12/18/02 1:09:04 PM, [EMAIL PROTECTED] writes: << Perhaps the ideal structure would be two classes of investors: 1) limited-liability bondholders, with dividends per bond equal to that of owners of common shares, and no voting rights. 2) unlimited liability shareholders, with voting rights.
Which do you think would have a higher market value? Fred Foldvary >> In practice larger corporations offer a wide variety of intermediate investment options. In particular some offer shares of preferred stock. Generally speaking preferred stock offers a guaranteed dividend, calculated as a percentage of face like a bond, but oftentimes payable only out of net income yet ahead of common stock. Thus the "preferred" element refers to getting paid in preference to common stock. Sometimes preferred stock votes, although not always equally with common stock, and preferred stock typically has no claim to residual income. The preferred stockholder's liability is limited to the face value of the preferred stock. I'm not sure that'd I'd offer an opinion as to what structure might be ideal. In the first place, I'm not in concept sold on the idea of a corporation. An artificial entity that "lives" indefinitely, has property rights like a person and unilaterally abrogates the rights of contingent creditors? And even if someone could persuade me that there's something natural about such a creation, I'd be reluctant to offer an opinion on the ideal structure of ownership for such an entitty because millions of people pursuing their own interests in free markets (would that we had some) would surely work out multiple better solutions than anything I'd come up with, not possessing their unique knowledge of time, place and preference. David Levenstam
