Market economy is essentially driven by capital. Capital has two core attributes: profit-seeking and liquidity. These two attributes determine the flow of capital - where the best benefits are possible.
We invest capital and create companies in order to obtain greater benefits after operation; investment institutions invest in to invest in , and we also look forward to gaining greater benefits from it. Whether it is investment, financing or profit exit, it is essentially a process of capital flow.
In this process, the company's equity architecture will change.
equity structure is an zero-sum game : under the framework of 100% of the total, each shareholder has more shares .
equity value can be a positive game: a healthy company, with the progress of equity incentives and equity financing , although the proportion of shareholders' holdings gradually decreases, the company's market value has increased due to the greater growth rate of the company's market value.
shareholder value mainly comes from two aspects: one is the dividend after the sales of products or services generates profits; the other is the capital appreciation obtained by transferring equity.
The former is determined by product thinking and will produce companies that make money; the latter is driven by equity thinking and will produce companies that make money. These two have the relationship between dialectically unifying .
Overall, the two are unified because temporary losses are for better profits in the future.
The core of the corporate governance structure is the balance of ownership, decision-making power and management power. It is necessary to use the equity structure to restrict it to avoid one share of the dominance of damaging the interests of small shareholders; it is also necessary to adjust and optimize the equity structure through equity incentives, equity financing, etc. under unified leadership, fully mobilize the enthusiasm of managers and investors, and maximize the interests of all shareholders.
Equity structure is the source of corporate governance. A good equity structure will lay a solid foundation for company management, decision-making, and the development of equity incentives and equity financing. If there are hidden dangers in the equity structure, then as the company develops, differences and contradictions will often arise between shareholders, and even disputes in control.
In the face of interests, morality, affection and human nature often cannot stand the test, as one of the basic assumptions of Western economics says: people are rational. When doing business, consolidating company control cannot rely on morality, affection or human constraints. The most effective way is to pay attention to the equity structure (design), prevent problems before they happen, and rely on the structure and mechanism to effectively control it.
The real master is not the one who turns the tide after problems occur, but the one who avoids hidden dangers from the beginning and makes problems never happen.
Before designing the equity structure, we first become familiar with the architecture of modern enterprises:
Under the modern enterprise system, corporate governance is divided into three levels:
1 is ownership, that is, equity, which is reflected in the form of shareholders' meeting and shareholders' meeting;
2nd is decision-making power and supervision power, which is reflected in the form of the board of directors and the board of supervisors;
3rd is management power, which is reflected in the form of various functional departments including the general manager or CEO (CEO). Among the three levels of
, ownership is the shareholders' meeting and the shareholders' meeting decide the ownership of the company's decision-making power and management rights. If you control the shareholders' meeting and the shareholders' meeting, you can control the board of directors, thereby deciding on the candidates for specific functional departments such as the general manager and grasp the actual operation and management rights of the company. This is the reason why "equity is king".
Take control of the company from top to bottom and achieve twice the result with half the effort or even once and for all; on the contrary, if you influence decision-making power and ownership through management rights, it will be half the result with twice the effort and it will be difficult to last.
Therefore, equity structure design is called top-level design.
A good equity structure is conducive to the major shareholder controlling the shareholders' meeting and the general meeting of shareholders, and then controlling the board of directors and functional departments, controlling the company's daily business management and major decisions, and ensuring that the company will not encounter constraints in key links of development.
