When roughly 60% of corporate profits go to shareholder dividends, how do you suppose that impacts corporate decision-making, both internally and externally?
One obvious point is that it means companies, which are legally obligated to increase those dividends, will be making decisions on the basis of short-term profits, not long-term productivity, innovation, and growth. They will not be thinking about the future of their companies, nor the future consequences on society f their short-term decisions.
Shareholders are the legal owners of a company, but they have no real connection to it. They don’t work there, they didn’t create it, and they can sell their shares whenever things get difficult. Company founders, and dedicated workers, on the other hand, genuinely want to see the business succeed. Private company owners re-invest their profits to develop their operations. When things get difficult, they can’t just opt out. They have to think about the long-term future.
The free-floating shareholder system is simply not good for a business; they have less money to invest in research and development, and they have less freedom to satisfy worker demands for better pay and benefits, because so much of their profits are distributed to people who have nothing to do with the company. And all of this impacts long-term success. Imagine a race horse whose trainer uses the prize money the horse wins in a race to feed and train and care for it; if there are multiple joint owners of the horse, and they take 60% of the prize money, it won’t be long before the horse won’t be capable of competing.
If workers at a company were the shareholders, you would have a completely different scenario because they would have a vested interest in the company’s long-term prosperity.