Seems like it's not in anyone's interests for company shares to be heritable. How many companies have been burned to the ground because someone inherited them and had no idea how to run such a company?
Is there any movement to force owners to liquidate their shares upon their death? I'm surely not the first one to think of something like this.
If Bob's Muffler Shop is incorporated, why shouldn't it be heritable?
In the US we generally don't confiscate companies from private individuals because we think we can run the company better. Additionally, shareholders would simply place the shares in a trust, or give the shares to their heirs before they die.
So, no. There really isn't any movement to force sales of family business at death.
If a thing is heritable indefinitely it is a title in the feudal sense. If my family could control Bob's Muffler Shop for ten generations aren't we sort of the Earls of Bob's Muffler Shop?
People own their own property and they can decide what to do with it. That’s what property means. They can leave a company to whoever they want, just like they can leave Aunt Gertrude’s silverware.
Companies are property and people can make extremely foolish decisions with them if they want because they are their property. I can buy an original Hiroshige print and use it to light a fire if I want. By the same token you can leave your billion dollar company to your feckless coke snorting, whore frequenting grandson if you want. That’s what owning something means.
Sure but at some point when the company gets to be that big and employ that many people, there is a public interest to see it continue to exist. Also as a public company they have a fiduciary duty to the shareholders to keep it running well.
There's some pretty good arguments to be made that when a major shareholder of a public company dies, their shares should be distributed by the board and not their will.
Taking (a part of) someone’s property is a tax. Deciding that you will do that to companies above a certain size is a tax on getting big, a discouragement to do so.
Security of property rights is a pretty compelling public interest. Keeping a particular company going is not on remotely on the same order. The fiduciary duty is a red herring. If you want to destroy your own property you can. If you make poor decisions about your own property that’s on you. Public companies are actively traded. If you don’t like management sell the shares. There are an uncountable number of ways that management can mess up. Why mess with property rights for one particular small class of ways companies can be messed up?
If there is an argument for taking someone’s property upon their death and give it to other people because they are co-owners of a company please make it.
> Deciding that you will do that to companies above a certain size is a tax on getting big, a discouragement to do so.
That's the biggest lie of all. High taxes has never discouraged someone from starting or growing a company. No one ever says, "gee I have a great idea but I don't want to pay a lot of tax on my windfall earnings so I just won't bother".
But if you're so worried about discouraging growth, then fine. Make it apply to the death of any shareholder -- upon death the board gets to say where the voting rights of the shares go. Let the owner will the value of the shares to whomever they want, but let the board decide where the voting power goes.
> That's the biggest lie of all. High taxes has never discouraged someone from starting or growing a company. No one ever says, "gee I have a great idea but I don't want to pay a lot of tax on my windfall earnings so I just won't bother".
This is not consistent with my model of human behavior. Some indicative evidence pointing to people caring about tax rates would be the skill bias of migration from the EU to the US, the gap in GDP per capita between Switzerland and its neighbors or how US natives are much less likely to go into STEM fields than immigrants. People do actually respond to incentives.
> But if you're so worried about discouraging growth, then fine. Make it apply to the death of any shareholder -- upon death the board gets to say where the voting rights of the shares go. Let the owner will the value of the shares to whomever they want, but let the board decide where the voting power goes.
This has an obvious failure mode. The people on the board deciding on who gets to vote for the board is just institutionalizing corruption. Once the board gets to decide who is on the board without outside input the process is complete.
Your model is wrong or incomplete, then. Corporate taxes were at 40+% during the 1950s, which was one of the most prosperous periods in American history. [0] During that same period, the top marginal bracket for individuals exceeded 80%. [1] Nobody says “oh, I’m just not going to bother making a lot of money” just because they face a high tax rate.
Incomplete. It’s not that difficult to be prosperous when you’re the only developed country that didn’t get bombed. As far as income taxes go you’re not completely wrong but if your firm can expense your car, lunch, dinner, rent for executive’s homes and children’s school fees you can have a great deal higher consumption inequality than inequality of earnings. Tax treatment has changed enormously since the 1950s in the US[1]. Also, really, nobody? I’m not claiming everyone responds in the same way, just that if you make things less attractive fewer people will do them. Think on the margin. Does increasing taxes on a thing mean no one will do sit? No. But fewer will.
> Back in the 1950s, the rich were really good at tax avoidance. All they had to do was to donate more than their total income to charity. (The so-called flying nun tax exemption.) This was doable because when you donated items that appreciated in value, you didn't get taxed on the increase in value, but got to claim the whole value.
So if your parents had bought a lot of art, you could donate the art. Better yet you could donate a million dollars to a charitable foundation you had, have them use it to buy a piece of art from you, and then donate 4 other pieces of art which are now valued at $1 million each.
The result was a huge run-up in the value of things like art, and a simultaneous increase in public art for display. When you visit the Metropolitan Museum, you're basically seeing the benefits of a tax dodge.
> Let the owner will the value of the shares to whomever they want, but let the board decide where the voting power goes.
That is terrible idea on so many levels it’s difficult to address them all. What is the value of the shares with no voting rights? And given your plan, I assume most boards would award the shares to themselves.
> What is the value of the shares with no voting rights?
I don't know, Google and BRK-B have no voting rights yet are quite valuable. The company still has assets of value. The value isn't entirely in the vote.
"Security of property rights is a pretty compelling public interes."
Is it really? You seem to be saying that public property is sacred.
If that is true its the only thing ever. Everything else has "within reason" attached to it, why not property rights.
I’m not saying public property is sacred. I’m not saying private property is sacred either. But security of private property is a big deal and shouldn’t be messed with for reasons that are too incoherent to be called an argument. Far better to increase the corporate tax rate than to just take people’s stuff. We can adjust the tax rate up and down. The government messing with property rights is a lot more durable. You can destroy a lot of trust very quickly and it takes a long time to build it up again.
Property rights are the foundation of our society. If your stuff can be summarily taken off you without consequence (branded 'haircut', 'nationalise','theft' etc) then you are strongly disincentivised to accumulate stuff. Capitalism folds and those who want better quality of life go elsewhere.
I never said taking anything from anyone without compensation. I said when someone dies the board of the company should decide where the shares go. I didn't say anything about their estate not getting compensated.
Would it be clearer if I said that the board should get to decide who can buy the shares, whether that be the estate (who would pay itself for them) or someone else?
The article goes on for pages and pages but I'm failing to see the drama. Owner of a large private publisher dies, and instead of passing the company to his sons he gives control to the chief of strategy who has been with the company for decades, and who he happened to date for some period of time. Like...okay? No one is contesting it. No one is rebelling. His sons are pissed, but of course they will be. She seems to be running the company exactly like how it was before, and how everyone expected (which makes sense considering none of the leadership has changed).
The article is alright if you want some background on Scholastic and Dick Robinson, but there is really no deeper story here.
> instead of passing the company to his sons he gives control to the chief of strategy who has been with the company for decades
There are two issues here: the wealth and the control of the company. I don't think it would have been terribly noteworthy if he'd split up his ownership. He could have given his ex-girlfriend voting shares and his sons shares with financial value. But that's not what happened. The whole bundle went to the ex-girlfriend, which is a bit of a strange occurrence.
I mean, there's drama, but it doesn't seem like particularly interesting drama from HN's point of view: more gossip than "anything that gratifies one's intellectual curiosity".
This isn’t “drama” — it’s two coddled sons of a wealthy man being “dramatic” that their father willed the company to the Chief Strategy Officer instead of them.
40 comments
[ 2.8 ms ] story [ 83.3 ms ] threadIs there any movement to force owners to liquidate their shares upon their death? I'm surely not the first one to think of something like this.
In the US we generally don't confiscate companies from private individuals because we think we can run the company better. Additionally, shareholders would simply place the shares in a trust, or give the shares to their heirs before they die.
So, no. There really isn't any movement to force sales of family business at death.
I dunno, are you the Earl of your great grandfather's pocket watch, or the Duke of the Heirloom Dresser?
Companies are property and people can make extremely foolish decisions with them if they want because they are their property. I can buy an original Hiroshige print and use it to light a fire if I want. By the same token you can leave your billion dollar company to your feckless coke snorting, whore frequenting grandson if you want. That’s what owning something means.
There's some pretty good arguments to be made that when a major shareholder of a public company dies, their shares should be distributed by the board and not their will.
Security of property rights is a pretty compelling public interest. Keeping a particular company going is not on remotely on the same order. The fiduciary duty is a red herring. If you want to destroy your own property you can. If you make poor decisions about your own property that’s on you. Public companies are actively traded. If you don’t like management sell the shares. There are an uncountable number of ways that management can mess up. Why mess with property rights for one particular small class of ways companies can be messed up?
If there is an argument for taking someone’s property upon their death and give it to other people because they are co-owners of a company please make it.
> Deciding that you will do that to companies above a certain size is a tax on getting big, a discouragement to do so.
That's the biggest lie of all. High taxes has never discouraged someone from starting or growing a company. No one ever says, "gee I have a great idea but I don't want to pay a lot of tax on my windfall earnings so I just won't bother".
But if you're so worried about discouraging growth, then fine. Make it apply to the death of any shareholder -- upon death the board gets to say where the voting rights of the shares go. Let the owner will the value of the shares to whomever they want, but let the board decide where the voting power goes.
This is not consistent with my model of human behavior. Some indicative evidence pointing to people caring about tax rates would be the skill bias of migration from the EU to the US, the gap in GDP per capita between Switzerland and its neighbors or how US natives are much less likely to go into STEM fields than immigrants. People do actually respond to incentives.
> But if you're so worried about discouraging growth, then fine. Make it apply to the death of any shareholder -- upon death the board gets to say where the voting rights of the shares go. Let the owner will the value of the shares to whomever they want, but let the board decide where the voting power goes.
This has an obvious failure mode. The people on the board deciding on who gets to vote for the board is just institutionalizing corruption. Once the board gets to decide who is on the board without outside input the process is complete.
——
[0]: https://en.wikipedia.org/wiki/Corporate_tax_in_the_United_St...
[1]: https://www.taxpolicycenter.org/statistics/historical-highes...
[1] See https://news.ycombinator.com/item?id=2979882
> Back in the 1950s, the rich were really good at tax avoidance. All they had to do was to donate more than their total income to charity. (The so-called flying nun tax exemption.) This was doable because when you donated items that appreciated in value, you didn't get taxed on the increase in value, but got to claim the whole value. So if your parents had bought a lot of art, you could donate the art. Better yet you could donate a million dollars to a charitable foundation you had, have them use it to buy a piece of art from you, and then donate 4 other pieces of art which are now valued at $1 million each. The result was a huge run-up in the value of things like art, and a simultaneous increase in public art for display. When you visit the Metropolitan Museum, you're basically seeing the benefits of a tax dodge.
That is terrible idea on so many levels it’s difficult to address them all. What is the value of the shares with no voting rights? And given your plan, I assume most boards would award the shares to themselves.
I don't know, Google and BRK-B have no voting rights yet are quite valuable. The company still has assets of value. The value isn't entirely in the vote.
Is it really? You seem to be saying that public property is sacred. If that is true its the only thing ever. Everything else has "within reason" attached to it, why not property rights.
And you claim (with no evidence) that there are good arguments for this.
Would it be clearer if I said that the board should get to decide who can buy the shares, whether that be the estate (who would pay itself for them) or someone else?
The article is alright if you want some background on Scholastic and Dick Robinson, but there is really no deeper story here.
There are two issues here: the wealth and the control of the company. I don't think it would have been terribly noteworthy if he'd split up his ownership. He could have given his ex-girlfriend voting shares and his sons shares with financial value. But that's not what happened. The whole bundle went to the ex-girlfriend, which is a bit of a strange occurrence.
No there isn't. It's being run the same. It's baseless mouth piece.