A publicly traded corporation is defined by its ownership, and its shares were issued to the public through an initial public offering. Therefore, it has the public as its shareholders or owners. Legally, a corporation is a separate entity from its owners; it is a legal entity on its own. As a result, it can own assets, borrow funds or enter into business agreements on its own. Shareholders are not individually liable for its indebtedness, with their liability limited to the amount of investment held in the corporation. The company has several primary goals.
A publicly traded corporation is established to sell goods or services in return for a profit. It generates profit when income from a good or service it sold supersedes the cost incurred in producing that good or service. In order to widen the gap between income and cost incurred, operating expenses must be kept at a minimum.
When a publicly traded company generates good returns, its share value goes up. The result is a high demand for the company in the stock market, and that marks the company’s success. If the company has losses, then its owners have no dividends and its shares perform poorly in the stock market.
Profit and growth have a very close relationship. A corporation grows as a result of profits. This is because it has funds available to finance the acquisition of assets and new equipment or to give its employees better pay packages. Shareholders rely on the corporation's directors to make use of policies will make the company grow. Corporate growth means more profits, which result in increased dividends to shareholders. The company also will have more potential to penetrate the market.
A publicly traded corporation that registers steady results spreads confidence among investors. In order to become stable, the company avoids rushing into market growth. Instead, its directors focus on providing quality services and products to clients consistently. This way, customers will trust the company and repeatedly select its products over items produced by competitors. On the other hand, the company must improve existing infrastructure and keep reviewing market strategies to remain competitive.
In the past, publicly traded corporations did not give much thought to corporate social responsibility. That factor, however, has become one of the primary goals of any corporation. Publicly traded corporations are within communities and take away land and other resources from the people living within those communities. Hence, it is morally correct for them to show appreciation to residents. Corporations have taken up the challenge to push for social actions that reflect kindness and care as compared to thirst for profit. As a result, companies engage in community activities such as school projects, donating to charity and environmental conservation.
- "Running a Public Company: From IPO to SEC Reporting"; Steven M. Bragg; 2009
Alphonse Lameck is a tutorial fellow based in Kenya, where he specializes in the field of management. He holds a Master of Arts in practicing management from McGill University, as well as a bachelor's degree in international business administration from United States International University.