UK Politics
General Discussion for politics in the UK.
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There needs to be laws that state dividends and bonuses can only be paid when the company shows incontestable success. Under no circumstances should a company be borrowing and paying dividends at the same time and the fact that OFWAT never flagged this, they should all go to jail for colluding to defraud the government.
What? Companies absolutely should borrow and pay dividends at the same time, that totally normal corporate financing. However, companies must also be allowed to fail and cause losses to anyone foolish enough to finance them when they take too much risk.
By definition necessary services like water don't belong in the private sector since we can't allow them to fail. The mistake was not that the company was allowed to pay too many dividends (that's what companies are for). The mistake was that we entrusted this stuff to private enterprise in the first place.
If they're borrowing, why are they paying dividends? In a non-capitalist society, they would only pay dividends when they're profitable, if they're profitable and debt free.
Because borrowing allows tax efficient financing of operations and business growth. Corporate debt by the way, also allows investors a lower risk way of participating in private enterprise.
"In a non-capitalist society." You mean one in which the joint stock company doesn't exist? Yeah if they didn't exist it would be pretty hard for them to either borrow or pay dividends.
Not trying to make a normative point, but society as it really exists (not some utopian counterfactual) and our legal system makes it very hard for them to do anything else. It would be weird and likely catastrophic if a corporation was like "we're going to deliberately screw over our share holders to pay back our bondholders even though it will probably result in poorer value service to customers because it would dramatically increase our cost of capital".