WHY STOCK COMPANIES?

Following are the major features of stock companies:

1. Management is legally separated from ownership.
2. Stock companies can gather together millions of small savers.
3. They can raise capital rapidly at any time by issuing new shares or credit bonds.
4. They can borrow bills, give preference shares, which are redeemable and are either payable or exchangeable for ordinary shares.
5. Ownership can be quickly transferred through stock exchange.
6. They can continue to operate even after the end of their legal period.
7. They can adapt to economic changes and cycles.
8. They can reduce production costs.
9. They can recruit the highest possible number of personnel.
10 . They can finance research and conduct experiments to improve products.
11. They are capable of facing foreign competition.
Stock companies have played a basic and leading role in the success of the free economic order in the Western world. Indeed, the yardstick of the strength of the economy of any country in the world is measured by the number of stock companies operating in it .

The more stock companies in a country the more its economy is capable of absorbing personal savings of citizen and others and turning them into huge investments from which shareholders, in particular, and the economy, in general, will benefit. The concept of stock companies is based on the ability of such companies to gather small amounts in one place to become millions to participate in the building of new projects to produce goods and services that an individual or a group of individuals cannot do.

Common ownership divides and spreads risks among the largest possible number of shareholders, while individual ownership bears all kinds of risks making shareholders hesitant to venture investing the whole capital in one or several projects at the same time.
Stock companies are more capable of undertaking large scale projects requiring huge investments which a single individual is unable to do. Unlike all other legal ownerships, stock companies are more capable than all of scientifically separating ownership from management. This means that an owner of funds is not necessarily a better manager.
Management employs the best personnel to manage the funds of an individual, who cannot, either because he does not lave sufficient time to manage his funds or because of his lack of experience and ability to manage his funds, leading him to invest them in stock companies to make use of their ability to manage and invest the money in giant projects that cannot be undertaken except with stock companies able to gather, manage and invest such funds in a manner that separates management from ownership .
This ensures that the regular structure of the company will carry on its operations whoever the owners are. Such an advantage enables the economy of any country to move from individual or family ownership to group ownership on the basis of institutions rather than individuals. The legal system continues to operate because it is constant, while the individual system ends with the individual’s end . This is the difference between an economy based on individual ownership and that based on company ownership with a system independent from individual ownership which ensures the continuation of an economy to undertake it .
This is the truth about stock companies and this is why the world prefers an economic system based on stock companies for the management of economic resources.

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