28. Widely-held (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.
Remember the scenario where you sell a majority of the shares in your corporation and can no longer guarantee that you have enough votes to do what you want? For most listed companies it’s not just one person or corporation who buys those shares from you. Instead it can be hundreds, thousands, or even hundreds of thousands of different people who end up owning your corporation’s shares. When no single shareholder has enough shares to win a vote on their own and ownership is shared among lots and lots of shareholders, the corporation is “widely-held.”
Lots of corporate governance nerds believe that widely-held corporations are the safest for shareholders. Here’s why. Let’s say Reallie Steilish has 100 shares and you decide to sell 49 of them to 49 different people. You still own 51 shares and can out-vote those 49 people even if they all think you’re doing a bad job. Plus, we’ve already established that you’re susceptible to making important business decisions based on your weird dreams. And one night you might have a dream where you get murdered by Billie Eilish and decide the next day to scrap Reallie Steilish altogether and launch Grill Nas X, a line of Lil Nas X-themed barbecues. Even if the 49 shareholders have some sensible objections (will our hat customers be interested in barbecues? “Grill Nas X” is a pretty lazy pun! Your dream has nothing to do with the real Billie Eilish!), you can just go ahead with your idea if you want to, no matter how bad it is for the corporation. That’s why people think widely-held is better – no one shareholder can make huge decisions on their own.
On the other hand, there are lots of bad widely-held corporations out there that might be a lot better if a really smart and dedicated person with great ideas had enough authority and power to just make things better.
Anyway, widely-held corporations are really common and if you own any shares in the real world most of them are probably shares of widely-held corporations.
