Stocks

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Stocks

 

or certificate of stock, a document that attests to the investment of a share of capital or other resources in a joint-stock company, which gives the right to obtain a share of the company’s profit in the form of a dividend. According to bourgeois corporation law and the charters of joint-stock companies, certificates of stocks are issued in even shares of the joint-stock capital and in round sums (for instance $100, $50, $25, $10, $5). According to the mode of disposition, stocks are divided into registered and bearer stocks; the former are usually issued in large nominal amounts and the latter in smaller and sometimes even very small nominal amounts. The size of bearer stocks depends on the policy and ability of the managers of the joint-stock company to circulate stocks at the stock exchange in order to enlist the resources of broad strata of the population. Thus, the law and practice in Britain and America led to the issue of bearer stocks in small and tiny nominal amounts (up to a dollar or a pound sterling). On the other hand, the law and the practice of joint-stock companies in Russia set a lower limit of 100 rubles for stock bonds. In Russia, unlike the West, a limit was set on the number of votes that one stockholder could have at the general meeting of the joint-stock company; this was done to protect the interests of small capitalists and investors. But these legal barriers were easily circumvented by banks and big capitalists who distributed blocks of shares to their employees; the latter were formally stockholders but in fact voted at the command of their superiors at meetings.

Stocks are divided into common and preferred shares according to the rate of earning. Owners of common shares are in fact granted privileges, but owners of preferred shares have legal advantages: they have priority in receiving dividends and in recovering investments (at their nominal value) in the joint-stock company if the company is dissolved—but only after the bond owners are satisfied; the latter always are guaranteed the property of the joint-stock company. Beyond that, corporation law and practice differ from country to country. In West Germany and France dividends on common shares are paid after the dividends on preferred shares are paid in specified amounts; both payments are made at the same percentage rate. The remainder of the sum earmarked for paying dividends is then distributed in equal shares between common and preferred stocks. This procedure is applied with different modifications in various countries. The owners of both types of stocks have equal voting rights at the general meeting. In the joint-stock companies of the USA the priority rights of preferred stocks to the dividend have in practice been reduced to 4–6 percent of the nominal value, and preferred stockholders have been deprived of the right to vote at the general meeting. This makes the preferred stocks almost equal to floated bonds with the difference that the dividends on them are a few percentage points higher but are not guaranteed unless the company’s profits are high enough.

A special type of preferred stocks is the so-called multi-vote stock (1920’s, Germany). This term is clearly inaccurate: the new type of stocks came into circulation when the US monopoly restored the military potential of Germany; these stocks did not confer many votes. On the contrary, the new stocks conferred fewer votes than the old stocks owned by the German magnates of monopoly capital. Thus, the old type of stocks became multivote stocks, as it were, and enabled the German monopolists to prevent their American partners from becoming corporate managers of the joint-stock companies of big industry and the banks.

I. F. GINDIN

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