The Equity Participation tell of the ownership of shares in a property or company. Equity participation can involve the acquisition of shares through options or by enabling partial ownership in exchange for financing. The greater the equity participation rate, the higher the percentage of shares owned by stakeholders. A very important fact is that companies may use different types of equity to create an equity participation program, for example, common stock, preferred stock, reserve, options or phantoms stock. A more profitable company will provide stakeholders with bigger gains (J. M. Schell 2019, s. 8-61).
The main points of Equity participation (J. L. Batman 2007, s, 681):
- equity participation effectively ties the stakeholder's success to that of the company's success
- equity participation constitutes the ownership in an asset, such as property or company
- equity participation is essentially used as a form of employee compensation or by companies doing business in emerging economies
How Equity Participation works
Equity participation is used in many companies and investments because of two main reasons. First, equity participation is used by companies operating in emerging economies in which local governments want to benefit the rewards brought on by development. The second reason for equity participation is it may be used to tie the financial rewards of executives to the fate of the company, climbing the likelihood that executives will make decisions that will pick up company profitability (E. Talmor, F Vasvari 2011, s. 17-41).
Rogene Buchholz in his literary work entitled "Rethinking Capitalism: Community and Responsibility in Business" is writing: "The typical stakeholders are considered to be consumers, suppliers, government, competitors, communities, employees, and of course stockholders. These are considered to be the primary stakeholders, but the stakeholder map of a corporation with respect to a specific issue can become quite complicated (R. Buchholz 2013, s. 98).
Stakeholder capitalism is a system in which corporations and companies are oriented to serve the interests of all their stakeholders. Under stakeholder capitalism, the main purpose of the company is to create long-term value and not to maximize profits and enhance shareholder value at the cost of other stakeholder groups. Stakeholder capitalism bases out understanding and expectations of business, not on the worst that company can do, but on the best. It sets a high moral standard, recognizes the common sense practical world of common business today, and asks managers to get on with the task of creating value for all stakeholders. It simply allows the possibility that business becomes a fully human institution (A. Bettley, D. Mayle, T. Tantoush 2005, s. 37).
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Author: Patryk Kozioł