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Developing a campaign against holding companies and parent companies
Holding companies and parent companies should be phased out.
The need for this change has grown since the Enron and World.com scandals, and the recent allegations against Lord Conrad Black.
A holding company is a company whose main function is to hold shares in other companies. It is distinct from a parent company, which is a company that owns shares in other companies - generally subsidiaries - but is also trading in its own right.
If company law were changed to abolish holding companies, then generally it would only be possible for shares in a limited company to be owned by individuals. When you think about it, why should it be otherwise?
A shareholder has limited liability. A shareholder only risks the amount of money they have paid for their shares. Historically limited liability was introduced to encouraged risk-taking.
But it is doubtful whether even liability can be justified. The main reason is that it encourages irresponsibility. It is not possible, for example, for a limited company to have a genuine commitment to sustainable development when shareholders can sell their shares, or the company can be wound up - regardless of the consquences of this action.
Clearly, if shares can be owned by a company this amplifies and extends the lack of responsibility. What justification can there be for this.
The exception
An exception must be made for pension funds. These are organisations which hold monies on behalf of employees, and invest them in stocks and shares.
Proposals
1. Shares can no longer be owned by companies, with the exception of organisations managing pension funds. If a company wishes to propose the setting up of a new, separate venture, they can recommend that their current shareholders buy shares in the new company.
2. Any organisation can lend money to another. But they cannot have voting rights.
3. Organisations managing pension funds may own shares in other companies. But steps should be taken to limit the range of companies eligible for this exemption - for example, companies established to make profit rather than to meet a genuine need, should be excluded.
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