22. For-Profit (definition)

NOTE: if you’re new to Ground-Up Governance, or are finding anything a bit strange or confusing, you might want to START HERE.

A lot of corporations exist for one basic purpose, which is to make profit and then mostly use it in a way that makes shareholders happy.  Companies like that will be our first sector, which we’ll call “for-profit,” which is so on the nose it’s cringey. But it’s a real thing. 

One way that for-profit corporations can use profit to make shareholders happy is to just give shareholders money.  That’s called a dividend.  Some corporations give dividends, and some don’t.  The more shares you own, the more dividends you get.  In some cases, a special type of shareholders gets preferred treatment and receives their dividends first and then everyone else only gets dividends if there’s any money left over.  They get preferred treatment because they own special shares called – you guessed it – preferred shares.  You probably don’t need to know or worry very much about any of that.

Another way that for-profit corporations can make shareholders happy is by using profit to make the corporation bigger or better.  Your corporation could get bigger or better by hiring new people, buying new equipment, making cool advertisements, starting new businesses, buying other good companies, or any other good idea you can come up with.  When your corporation grows or performs well it usually means your shareholders can sell their shares for more money, which makes them happy.

There’s some subtext here, or maybe just text, which is that for-profit corporations have to pay a lot of attention to shareholders. Pets are an apt analogy: On the spectrum of pets that people like to own, some are very high maintenance and others thrive on neglect. Dogs and cats, for example, need to eat and poop every day and are even happier if they get exercise and attention. In the middle, hamsters, frogs, and most lizards all need food every day, and probably a specialized environment, but they don’t really mind if you ignore them and occasionally clean up after them. At the opposite end, most snakes and spiders eat only once every couple of weeks and are perfectly happy being left completely alone.

Your stakeholders will fall on a similar spectrum. A lot of shareholders, like dogs and cats, demand all kinds of attention and take up the majority of oxygen in discussions about corporate stakeholders. This is especially true for listed corporations.

You’ll also have lots of snake- and spider-like stakeholders who are perfectly happy being left alone, BUT if you spent more time paying attention to them you’d realize they’re super cool and maybe a lot more important to the world than even your fuzzy, cuddly, warm-blooded shareholder friends. That made sense, right?

Another thing about for-profit corporations is that most people when they hear the word “corporation” think about for-profit corporations. Try it: name three corporations, fast!