Joint-Stock Company

Also known as “limited liability company”. Enterprise that raises capital and operates joint ventures by issuing shares. Joint-stock companies arose from the socialization of capitalist production and the development of the credit system. Along with the increase in the degree of socialization of production and the continuous expansion of the scale of enterprises, it became difficult to set up large-scale enterprises by relying only on individual capital, thus requiring the establishment of a mode of raising capital through the issuance of shares. The emergence of joint-stock companies indicated a shift from the mode of individual capital operation to the mode of joint capital operation, which was a partial adjustment of capitalist relations of production without changing the nature of private property nature of enterprises. The development of the capitalist credit system has promoted the emergence and development of joint-stock companies.

As a legal person organization, the organizational structure of a joint-stock company generally includes an organ of power, an organ of operation and management, and an organ of supervision, and accordingly establishes a system of decision-making, execution and supervision. Its concrete forms are the shareholders’ meeting, the board of directors (and the general manager appointed by the board of directors), and the supervisory board. The shareholders’ meeting is the highest organ of power of the company; the board of directors is the company’s business decision-making organ, and the general manager appointed by the board of directors is responsible for the daily production and management of the enterprise; the supervisory board is the company’s organ of supervision. Each of the three performs their own duties, with clear rights and responsibilities and constraints on each other. This organizational structure is conducive to the formation of incentives and constraints from within the enterprise to ensure the efficient and smooth operation of the enterprise.

Capitalist joint-stock company is essentially a form of control of small capital by big capital. Nominally, shareholders have the right to attend and vote at general meetings, but since voting rights are calculated on the basis of the number of shares, and not on the basis of the number of shareholders, the joint-stock company is in fact controlled by a small number of big shareholders who hold a large number of shares and who actually become the real owners of the company. As long as the big capitals hold a controlling interest in the shares, the joint-stock company is controlled by them. Due to the issuance of small shares and the fragmentation of the shareholding, big capitals can acquire a controlling stake in a joint-stock company by owning only 30% or 20% of the shares, or even less, and thus control the entire capital of a joint-stock company.

The joint-stock company, as a form of capital operation organization appropriate to socialized large-scale production, play an important part in furthering the development of the capitalist economy. First of all, it is conducive to promoting the rapid gathering of capital and optimizing the investment structure. By issuing shares, a joint-stock company can gather a large amount of idle social capital within a short period of time, establish large-scale enterprises, implement large-scale operation, and promote the development of socialized production. The liquidity of shares is conducive to the transfer of capital, thereby optimizing the investment structure and promoting the rational allocation of resources. Next, it is conducive to the separation of shareholders’ property and management and improves the operational efficiency of the enterprise. In a joint-stock company form, the rights, responsibilities and benefits of owners and operators are clearly defined, which can greatly improve the management and operational efficiency of the enterprise. Finally, it is conducive to the completeness and stability of the financial affairs of the enterprise. As an independent and complete enterprise, a joint-stock company has legal personality for all the property formed by shareholders’ investment, which ensures the completeness and stability of the enterprise’s property.