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by danmaz74 3164 days ago
If I got this correctly, when you sell your shares with high voting power, they lose their high voting power.
2 comments

Then you'd just create an incentive to sell the share in dark markets. You'd officially still be the owner of the share, but in secret you would have sold your voting right by agreeing with someone to vote on command in exchange for money.

As is said in the 1981 movie "rollover", capitalism is like a force of nature : you can try to fight it, but in the end it always win[1]

And even if somehow you succeed, you would have created capital that can not be bought nor sold, or can only be bought and sold from and to a particular category of investors. You would have introduced a bit of communism in the system (in the sense that in communism, buying or selling capital is forbidden). I guess some people will be happy about that, but I won't.

1. https://youtu.be/m1aQ-XGWors?t=151

For an analogy, look at the effects of California's Prop 13, where holding property long term gets you dramatically lower property taxes.
Are those dark markets contracts enforceable?

By the way, this is nothing like communism, not even close. This is a perfectly market oriented solution, if you don't like the idea, don't buy this kind of shares, nobody forces you to do so. If the model will prove good for companies and their investors, it will prosper, otherwise, it won't.

> Are those dark markets contracts enforceable?

Of course they are. When absurd laws try to prohibit market forces, shadow markets emerge and they tend to have their own enforcement policies. Think mafia, prohibition in the 20s, corruption and stuff. Things get ugly, but they get done. The point of having regulated markets is precisely to put some order and fairness into this.

> This is a perfectly market oriented solution, if you don't like the idea, don't buy this kind of shares

It is not, and the problem is that if that idea were to become popular, then capital would become more and more difficult to buy. So yeah, it's a step towards communism indeed. In the end, it's all about adding restrictions to the circulation of capital.

You can't artificially attach a right to something that would depend on the duration of ownership. In a free country, you can buy and sell stuff, which by definition means their value can not depend on the duration of ownership.

Let me make that reasoning clearer. Imagine I've owned an object for an extended duration, and that this extended duration gives it an additional value V. In a free market, I'm supposed to be able to sell this value V, but if I do, then the buyer will own this object with this extra value V, despite the fact that he's just bought the object. So your initial goal of giving value to duration ownership has been defeated.

So basically a free market is free as long as it only creates contracts that you like, otherwise it's communism. Ok.
We can get around this easily enough with a Total Return Swap. This way we can move the economic interest around with out ever moving the shares.
Our system actually handles this gracefully. If you change the beneficial owner, that’s the same as selling the shares (for voting purposes)
I TRS has nothing to do with the beneficial owner. The company has no way of knowing that the TRS even exists.
The beneficial owner of record will never change.