Neil Tambe

I'm a Detroiter who happens to enjoy writing, national parks, orange juice, the performing arts, and fanciful socks. More than anything though, I aspire to be a good husband, father, and citizen.

Society is every company's debtholder

I'm not convinced society should be companies' customer and shareholder or whether it should be, but I strongly believe that society is and should be thought of as every company's debtholder. WHY SOCIETY IS A DEBTHOLDER In short, a debtholder lends resources to a business (i.e. money) and expects the money to be repaid. In exchange for the risk that the company won't be able to pay them back, they insist upon charging a fee (interest).

In addition to that, debtholders aren't "residual claimants" if and when the company goes bankrupt. What that means is if a company goes bankrupt debtholders aren't the last people paid when the company's assets are liquidated (shareholders are).

Society is definitely a debtholder of sorts for a business because it does lend resources to companies that they risk not being "paid back" for, in effect. For example, society "lends" the following resources to companies:

-Enforced rules which create fairer markets -Clean water and air and access to other natural resources -An educated workforce -Roads and infrastructure to transport goods -Assurances for citizens which transfer the burden of social welfare (e.g., unemployment, healthcare) to the state -I could go on

Moreover, companies are getting a a great deal on all these resources. If companies privately tried do these things it would be astronomically expensive, even if they were possible. My guess is, the value companies get from these resources far exceeds the amount they pay for these resources in taxes.

If companies don't compensate government for the risk they are taking to invest in resources, we all run the risk of the government running out of money to keep lending these resources to companies. For example, if companies don't reinvest (i.e., pay back their "interest") in the workforce, eventually the workforce will be so devoid of skills to the point where government provision of these resources becomes unsustainably costly.


So here's the takeaway. Companies uses resources that society lends. They ought to pay their "interest" on these resources or eventually there will be no resources left to lend.