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Author Topic: Some questions about rich people! (RP related)  (Read 654 times)

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Offline BeorningTopic starter

Some questions about rich people! (RP related)
« on: July 07, 2014, 08:41:39 AM »
Lately, I'm developing a mood to play a modern or sci-fi character who is of "rich and influential" type: a heiress, a high-ranking corporate executive etc. The problem is, I don't know that much about the lives of people like that. So, I thought I could ask around here! :)

Here are my questions:

1. Are there really people who were born to families so wealthy that they don't need to work? I mean, if you are really rich, you could just deposit money in the bank and live off the interest. Does this happen?

2. There are rich people who own or run corporations (I don't think it must be the same thing, right?). So, what happens to their children? Can a corporate head, one day, just decide to pass his role to the daughter? Or have their children get employed like everyone else, starting at the bottom?

3. If the the answer is the former, then what do ordinary employees think of this kind of situation? Is it considered crass to, say, make your child a head of a large department out of a sudden? Or is it considered normal?

4. Assuming you are *not* a child of a corporation owner, then how do you become a high-ranking corporate executive, exactly? Is it realistic for young person to be one?

Help me out here, folks :)

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Re: Some questions about rich people! (RP related)
« Reply #1 on: July 07, 2014, 08:55:53 AM »
1. Are there really people who were born to families so wealthy that they don't need to work? I mean, if you are really rich, you could just deposit money in the bank and live off the interest. Does this happen?
There are.  These are called trust fund babies and don't necessarily need to be super rich.  Wealth in many long-established families is handed down through generations and it is common for grandparents to provide trust funds for grandchildren.  Quite often, however, these trust funds are tied up as to how the proceeds are disbursed.

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2. There are rich people who own or run corporations (I don't think it must be the same thing, right?). So, what happens to their children? Can a corporate head, one day, just decide to pass his role to the daughter? Or have their children get employed like everyone else, starting at the bottom?
Some families function as dynasties with the ownership/control of companies passing down to children whether the child wants it or now.  Still, a son (usually) daughter can be brought into a company after college/university and placed in any sort of job to gain experience in running a company.  Occasionally, the offspring are given entry level jobs and encouraged to work their way up.  The can be brought in at managerial levels if they have experience elsewhere.  Keep in mind that the survival of the company is important because the family owns stock that is tied to their wealth.  Poor management means falling stock prices and profits.

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3. If the the answer is the former, then what do ordinary employees think of this kind of situation? Is it considered crass to, say, make your child a head of a large department out of a sudden? Or is it considered normal?
It is both considered normal and a source of irritation and resentment for employees especially when the offspring is arrogant, stupid, inexperienced or lazy.

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4. Assuming you are *not* a child of a corporation owner, then how do you become a high-ranking corporate executive, exactly? Is it realistic for young person to be one?
When you have enough money you can buy the company and put yourself in charge or start a new company with yourself at the heat of it.  It is unrealistic if the person is very young and inexperienced but it does happen.

Offline BeorningTopic starter

Re: Some questions about rich people! (RP related)
« Reply #2 on: July 07, 2014, 09:35:38 AM »
There are.  These are called trust fund babies and don't necessarily need to be super rich.  Wealth in many long-established families is handed down through generations and it is common for grandparents to provide trust funds for grandchildren.  Quite often, however, these trust funds are tied up as to how the proceeds are disbursed.

And these people really don't work? All their lives? That'd be a pleasant situation to be in :)

Quote
Some families function as dynasties with the ownership/control of companies passing down to children whether the child wants it or now.  Still, a son (usually) daughter can be brought into a company after college/university and placed in any sort of job to gain experience in running a company.  Occasionally, the offspring are given entry level jobs and encouraged to work their way up.  The can be brought in at managerial levels if they have experience elsewhere.  Keep in mind that the survival of the company is important because the family owns stock that is tied to their wealth.  Poor management means falling stock prices and profits.

Just to clarify something: an owner of the company doesn't have to run it, right? You can be an owner and hire a separate person as a CEO etc.?

BTW. Many companies are stock companies these days... but why, exactly? An owner can lose the control of their company that way. Why not keep owning all of it?

Also, if I am an owner of a company, then can I decide just to keep all profits to myself and give nothing to the company?

Finally, having stocks also gives a person money, right? So, a rich family's child could simply have a lot of stock in the family company and live off it?

Offline Inkidu

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Re: Some questions about rich people! (RP related)
« Reply #3 on: July 07, 2014, 10:00:31 AM »
They don't have to work, but most do actually despite the stigma being a trust-fund baby has.

In order of posting:

Yes, you can own a company and hire someone else to run it. Bruce Wayne and Lucius Fox are a good fictional example of this.

Most companies are stock companies. It's known as publically traded which means they're owned by the majority shareholder. Yes you can lose majority share and technically lose control of your company. Usually this is done by hostile take over and the company is parted out.

Yes, but it's highly illegal or stupid depending on the nature of the company. Illegal to keep all the profits from a publically traded company (it's called embezzlement), stupid from a private company because you have to reinvest to grow.

Yes and no. Stocks are, technically speaking, worthless. What makes people money is two things. They buy stocks and sell them at a profit. This can be done in a market day (day traders) or over time as an investment strategy. Buy up a bunch of penny stock in a mineral exploratory company and they hit a mother lode letting you sell your stocks for big money.

Or they make money off the dividends. That is the amount of money the company pays you the shareholder for having money in their stock. You're an investor and as an investor you're entitled to a share of the profits. Owning a lot of stock in a stable, highly-profitable company can pay big dividends. 



Offline BeorningTopic starter

Re: Some questions about rich people! (RP related)
« Reply #4 on: July 07, 2014, 11:36:00 AM »
They don't have to work, but most do actually despite the stigma being a trust-fund baby has.

I wouldn't...  ;D ;D ;D

Anyway, could those trust-funds be big enough so that a person living off them would have an opulent life? Like, owning-a-big-yacht opulent?

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Yes, you can own a company and hire someone else to run it. Bruce Wayne and Lucius Fox are a good fictional example of this.

In this kind of situation, I gather that the owner still gets to make some decisions? As in, how much money they want to get from the profits etc.?

Quote
Most companies are stock companies. It's known as publically traded which means they're owned by the majority shareholder. Yes you can lose majority share and technically lose control of your company. Usually this is done by hostile take over and the company is parted out.

And the biggest stock holders form some kind of overseer board, right?

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Yes and no. Stocks are, technically speaking, worthless. What makes people money is two things. They buy stocks and sell them at a profit. This can be done in a market day (day traders) or over time as an investment strategy. Buy up a bunch of penny stock in a mineral exploratory company and they hit a mother lode letting you sell your stocks for big money.

Or they make money off the dividends. That is the amount of money the company pays you the shareholder for having money in their stock. You're an investor and as an investor you're entitled to a share of the profits. Owning a lot of stock in a stable, highly-profitable company can pay big dividends.

Again, how high would these dividends be? Could one get extra-rich only from dividends, without having to work?

Offline mia h

Re: Some questions about rich people! (RP related)
« Reply #5 on: July 07, 2014, 11:46:47 AM »
1. Are there really people who were born to families so wealthy that they don't need to work? I mean, if you are really rich, you could just deposit money in the bank and live off the interest. Does this happen?
In theory you could stick money in the bank and try and live off the interest, but you have to take into account inflation. If you have million dollars in the bank and inflation is running at 2% that money in the bank has to earn at least $20,000 a year to retain it's real terms value. So sticking in the bank and hoping for the best isn't a good long term strategy, which is where accountants and investment managers come in.

2. There are rich people who own or run corporations (I don't think it must be the same thing, right?). So, what happens to their children? Can a corporate head, one day, just decide to pass his role to the daughter? Or have their children get employed like everyone else, starting at the bottom?
Depends on the company set up, but most big corporations have a CEO\President who runs the business and a Board of Directors who oversee the CEO, and if profits don't look good then the Board removes the CEO. Now if someone has enough stock they can get themselves on the Board (depending on how the company is run) and could then be voted in as Chair if they can get enough support, so it's possible that a parent could gift enough stock to a child to give the child a claim to a seat and then if they have the votes get the child elected as Chair. So with a bit of maneuvering it would be possible to get family members into very senior positions. But the corporations credibility would probably take a hit in the process

3. If the the answer is the former, then what do ordinary employees think of this kind of situation? Is it considered crass to, say, make your child a head of a large department out of a sudden? Or is it considered normal?
Depends on the company, smaller family owned companies it wouldn't be entirely unexpected to see family members rise up the ranks very rapidly. But they have to think about the long term, if that family member is clueless cost the business money and damages its reputation then they won't make it right to the top.
Look at Rupert Murdoch's offspring, his sons were being groomed to take over his postion as Chairman of NewsCorp, but because of various scandals in family feuds the chances of any of Murdoch's offspring becoming Chair are now close to zero.


4. Assuming you are *not* a child of a corporation owner, then how do you become a high-ranking corporate executive, exactly? Is it realistic for young person to be one?
When you right to the top of the corporate tree there are only so many postions available and a long line of people waiting for the person above them to screw up and get fired, retire or die. And if everyone in that line has 20 years more experience than you, then it's going to be a hard sell. Now if the person has a genius idea and starts their own company, assuming that they don't get eaten alive by corporate sharks and business guru's who all want a piece of the success story, then someone could get to the top of their own company. Just look at the likes of Steve Jobs and Bill Gates who was a billionare by the age of 32.

Offline Inkidu

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Re: Some questions about rich people! (RP related)
« Reply #6 on: July 07, 2014, 11:58:58 AM »
I wouldn't...  ;D ;D ;D

Anyway, could those trust-funds be big enough so that a person living off them would have an opulent life? Like, owning-a-big-yacht opulent?
Not usually. They're usually just college funds, the bigger ones can make sure a person never goes without if the person or trustee is responsible.

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In this kind of situation, I gather that the owner still gets to make some decisions? As in, how much money they want to get from the profits etc.?
It depends on you really. Some of the people who own but aren't in the game just let the company run itself rather than screw things up.

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And the biggest stock holders form some kind of overseer board, right?
Yes and no. It depends, a large shareholder doesn't have to be on the board. The board could be made up entirely of employees. CFOs CEOs Presidents and Vice Presidents, some senior accountants and analysts. I think companies are bound by law to have what's called a shareholders meeting where anyone with stock in the company can get a kind of state of the union open forum thing.

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Again, how high would these dividends be? Could one get extra-rich only from dividends, without having to work?
Depends entirely on how much stock you own, and how much each share pays out in dividends. Most companies actually will pay you out in stock options, which are rolling your money back into stock, naturally growing your shares. You can opt for money though, stock options usually have a little incentive so they don't have to pay out pure profit.

Online Orange Marmalade

Re: Some questions about rich people! (RP related)
« Reply #7 on: July 07, 2014, 12:24:42 PM »
Lately, I'm developing a mood to play a modern or sci-fi character who is of "rich and influential" type: a heiress, a high-ranking corporate executive etc. The problem is, I don't know that much about the lives of people like that. So, I thought I could ask around here! :)

Here are my questions:

1. Are there really people who were born to families so wealthy that they don't need to work? I mean, if you are really rich, you could just deposit money in the bank and live off the interest. Does this happen?

There are many people like this. A lot of times they still choose to work, just because it looks better if they do and it is a status symbol to be doing something big and powerful or being 'CEO' of their own company or whatever. But there's plenty or don't or just dabble. Look at Paris Hilton as an example here.

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2. There are rich people who own or run corporations (I don't think it must be the same thing, right?). So, what happens to their children? Can a corporate head, one day, just decide to pass his role to the daughter? Or have their children get employed like everyone else, starting at the bottom?

Corporations can be privately owned or publicly traded.

Privately owned with no outside investors/major debt: You're the boss, it is your company. You can hire, fire, institute policies, whatever. You're the owner, so you might take the direct role of CEO/President, or you might hire someone to do it. You might stay the owner but give that job to your child. You can make your child start at the bottom or hire them into any position you want. You can effectively 'give' it or pass it on to a child or anyone you like, though of course there's taxes involved.

Privately owned with outside investors: You may, due to obligations with loans and the like, be forced to have a Board of Directors type setup and give your investors voices into your company. You may also be bound by certain terms of their investments on what you can and can't do (like just giving the business away for example), but this doesn't seem like what you're going for here :)

Public corporations (with publicly traded stock): Most major decisions in the company come from the Board of Directors, which generally are elected or at least 'approved' by the shareholders. Of course, since it is basically a vote, if you had over 50% of the stock in the company then basically anything you say goes. You yourself can nominate board members, the CEO, etc. This is called having 'controlling interest'. It is very uncommon in major corporations but far common in smaller ones (of course we're talking billions vs millions here). Having less than a majority still can give someone absurd power though - example Warren Buffet owns 20% of Wells Fargo. Imagine being able to sway any vote by 20%.

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3. If the the answer is the former, then what do ordinary employees think of this kind of situation? Is it considered crass to, say, make your child a head of a large department out of a sudden? Or is it considered normal?

I think a lot of this depends on the size and the qualifications. If it is a decent sized company and you're bringing in a recent graduate into a Director or VP level position,  everyone is going to know exactly what  it is - pure nepotism. However, in private companies it isn't unusual at all, as they may want to keep their kids closed so they can pass on the family legacy.

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4. Assuming you are *not* a child of a corporation owner, then how do you become a high-ranking corporate executive, exactly? Is it realistic for young person to be one?

Generally speaking, through a gradual increase of responsibilities. Come in with a degree or work experience towards the bottom, work your way up from an individual contributor to a manager, senior manager, director, vice president, whatever. A lot of money or the right connections can do it, too. Especially in startups I've seen people get hired based on who they play sports with or worked at in previous jobs. (I've got a friend right now who is a Vice President when previously he was basically a mid level dude at a big company. He just knew a guy who was starting a company that got some funding and got hired into it. Of course this isn't a huge company, but still.

Offline Mathim

Re: Some questions about rich people! (RP related)
« Reply #8 on: July 07, 2014, 02:36:11 PM »
Related question: When you sell stocks, does there have to be someone who wants to buy them lined up or what?

Offline BeorningTopic starter

Re: Some questions about rich people! (RP related)
« Reply #9 on: July 07, 2014, 02:38:03 PM »
If I may add: why would a company go into stocks / become public? What's there to gain, exactly?

Offline Beguile's Mistress

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Re: Some questions about rich people! (RP related)
« Reply #10 on: July 07, 2014, 02:49:32 PM »
Related question: When you sell stocks, does there have to be someone who wants to buy them lined up or what?
Stock transactions are handled through brokers.  Your broker has relationships with other brokers.  Available stocks are offered and investors contacted.  Viable stocks are usually easily sold.

If I may add: why would a company go into stocks / become public? What's there to gain, exactly?
Going public generates money for the company that does not come out of the owner's pocket or derive from loans the owner needs to pay back.  Buying stock in a company is a form of risk.  Well-managed companies have stock that rises in value so the risk to investors is low.

Offline mia h

Re: Some questions about rich people! (RP related)
« Reply #11 on: July 07, 2014, 02:51:18 PM »
Related question: When you sell stocks, does there have to be someone who wants to buy them lined up or what?
Sort of, the actual mechanics can get really complicated. But essentially when you sell stocks, you don't sell them straight away, think of it like an advert where you tell people that you are willing to sell X shares at a Y price. It's then up to buyers do decide how many they want to buy and how many.
But there are big differences between personal share dealing and corporate big city dealers. Personal shares generally aren't sold to the market but to intermediaries who make tiny amounts of money on each share they buy from you and then sell onto the market, but because they trade so many shares those tiny amounts add up.

If I may add: why would a company go into stocks / become public? What's there to gain, exactly?
It's a pretty good way to raise capital to invest in the company, so you sell half the company it becomes three times the size and everybody wins.
Also being publicly trade adds a certain level of *struggles for the exact right word* cache I suppose. You're company is now big enough to play in the top leagues, and confidence in the company is then reflected in the share price.

Offline Ebb

Re: Some questions about rich people! (RP related)
« Reply #12 on: July 07, 2014, 02:54:41 PM »
Here's a pretty good article that covers the basics of stocks, stock trades, incorporation, etc.:

http://money.howstuffworks.com/personal-finance/financial-planning/stocks.htm


Offline BeorningTopic starter

Re: Some questions about rich people! (RP related)
« Reply #13 on: July 07, 2014, 03:07:02 PM »
Okay, thanks for the answers so far. It's all very helpful.

Now, I have a weird question about how rich people may think...

Basically: they own and / or earn a lot of money. I'd risk saying that they have at least a few times more money than one needs to lead a safe, relatively comfortable live. So... why don't they give this money away? Other people need it...

I'm not saying I'm a saint :) If I had that much money, I'd like spending it, too. I'm a weak man :) But, speaking for stricly ethical point of view... not giving that many for the poor seems wrong. And still, rich people don't do that. Why?

The above is not supposed to be offensive. I'm trying to understand how rich people think...
« Last Edit: July 07, 2014, 03:12:18 PM by Beorning »

Offline mia h

Re: Some questions about rich people! (RP related)
« Reply #14 on: July 07, 2014, 03:14:24 PM »
That really depends where you are in the world. If you look at the US then charitable giving among the rich is almost like a competitive sport in seeing who can be the most philanthropic, again look at Bill Gates and see how much money he's given away, over $28 Billion . If you want to socialize with other high earners you have to do the same things they do and giving money to charities is a big part of that. Compare that with the UK where that level of philanthropy doesn't exist, because the tradition of being financially charitable doesn't exist.
« Last Edit: July 07, 2014, 03:16:47 PM by mia h »

Offline Chris Brady

Re: Some questions about rich people! (RP related)
« Reply #15 on: July 07, 2014, 03:38:41 PM »
And these people really don't work? All their lives? That'd be a pleasant situation to be in :)

It can be, but it can also be a source of boredom.  And this is where we hear a lot of dysfunction and vices crop up, parties, drug use, alcoholism at the worst, degenerative end.  Sometimes you get people who are also into dangerous things.  Less common are those who spend their money doing charitable works.  Again, often to try and alleviate boredom.

Offline BeorningTopic starter

Re: Some questions about rich people! (RP related)
« Reply #16 on: July 07, 2014, 04:42:14 PM »
Oooh, good point. I didn't thought about this...

Okay, I keep thinking about all this and two possible characters emerge for me:

1. A heiress which is also directly involved in her family's company. A busy corporate type.

2. A heiress who doesn't have to work and is somewhat involved in various businesses (the family one, most probable) just to keep herself from getting totally bored.

I wonder if there is a relatively "cozy" corporate function the second character could have? For example, I keep thinking that she might serve as her family's representative on the corporation's Board of Directors. It wouldn't be *extremely* time-consuming job, would it? So... would such a situation be realistic?

Offline Ashton

Re: Some questions about rich people! (RP related)
« Reply #17 on: July 07, 2014, 04:51:31 PM »
You could have her at some kind of PR position for the business.. which would mean going to parties, hosting parties, making a lot of visits to places just to talk about herself and/or her business and what it's accomplished, conferences if there are any about her businesses focus/etc.

Offline consortium11

Re: Some questions about rich people! (RP related)
« Reply #18 on: July 07, 2014, 06:16:03 PM »
I may well simply be restating things that have already been said...

1. Are there really people who were born to families so wealthy that they don't need to work? I mean, if you are really rich, you could just deposit money in the bank and live off the interest. Does this happen?

Yes, but not in the "deposit money in the bank and live off the interest" sense; interest rates are generally too low when compared to inflation to make it a viable strategy.

Those who don't have to work but don't want to just spend the money until its gone tend to take one of two approaches:

1) Landlording; buy a property, rent it out through a property company that does all the work (and takes a fee) and then keep the rest of the money for yourself.

2) Stock/share investments; many companies pay what is known as a "dividend"; in essence it's a bonus paid to shareholders each year. As long as you own the shares you get the money.

As for the children of rich parents, they tend to get what is known as a "Trust Fund". Without getting too technical into the legality and finances behind it, in essence the parents put aside a large amount of money for their children which they can only access under certain conditions; traditionally they get an "allowance" a year, with access to more of money being made available once they pass certain landmarks (turning 18, graduating, getting married etc etc)

2. There are rich people who own or run corporations (I don't think it must be the same thing, right?). So, what happens to their children? Can a corporate head, one day, just decide to pass his role to the daughter? Or have their children get employed like everyone else, starting at the bottom?

Owner and running a company are different. Ownership refers to how many shares in a company someone owns (generally 50%+1 is required for ownership but there are some technical tricks that can be pulled with shares to lower that number). Running a company is simply being in charge of it day to day; generally it comes with a title like Chief Executive or Chief Executive Officer (CEO). An owner isn't necessarily the one who runs the company and whoever runs the company isn't necessarily the owner.

In the case of ownership the parent can simply pass their shares to their child and thus pass ownership. In the case of owning and running the company the owner/runner can simply pass the shares and/or hire the child to a role. In a case where they merely run the company it becomes slightly more difficult but can still be done; the other shareholders or owners may kick up a fuss.

3. If the the answer is the former, then what do ordinary employees think of this kind of situation? Is it considered crass to, say, make your child a head of a large department out of a sudden? Or is it considered normal?

It depends on the company. To give some high profile examples of it happening News Corporation is owned and run by Rupert Murdoch who has given high profile roles to his children James, Elisabeth and Lachlan, although the latter two have since left. The WWE is majority owned by Vince McMahon who has at various times employed his wife Linda and children Shane and Stephanie in high profile corporate (and on-screen) roles. The Rothschild Family is one of the most infamous banking families in history with multiple different branches, companies and banks. What unites them is that if you look at the board of directors you'll invariably see several with the second name "Rothschild".

In general however, this only really applies to companies where there is a single person/family who is the owner. In a situation where there are institutional investors controlling a large amount in general there tends to not be so much nepotism.

4. Assuming you are *not* a child of a corporation owner, then how do you become a high-ranking corporate executive, exactly? Is it realistic for young person to be one?

You apply for the job and get it, either internally or externally (although "apply for the job" is a bit of a misnomer). Bob Diamond came from a humble background, started out as an investment banker on the trade floor, moved into more of a management role and eventually ended up running Barclays. Fred Goodwin was the son of an electrician, the first of his family to go to university and about as working class as you get but made his way through the banking world to become the head of RBS. Lloyd Blankfein, the head of Goldman Sachs and thus arguably the most high ranking corporate executive in the world has a similar background... relatively poor working class, made his way up through the investment banking industry starting at the coalface.

As for "young" it largely depends how you define young and how you define "high-ranking corporate executive". For the real top jobs, CEO, COO and the like, of a major corporate you'll likely be looking at late 30's/early 40's at the youngest... and those are generally pretty exceptional cases with mid-40's to early-50's being more likely. But for positions slightly down the totem pole but still high ranking late 20's-to early 30's becomes a possibility.

I wonder if there is a relatively "cozy" corporate function the second character could have? For example, I keep thinking that she might serve as her family's representative on the corporation's Board of Directors. It wouldn't be *extremely* time-consuming job, would it? So... would such a situation be realistic?

Non-executive director (as in a director who sits on the board but otherwise doesn't have a day job) is a perfect example. For example, the average pay for a non-executive director of a FTSE 100 company (the top 100 companies in the UK) is about 61,000 for a job that can amount to little more than a few days work a month. If a company is part of a group (i.e there's one holding company that owns a number of other companies) the person could sit of multiple boards and earn a lot of money for very little work.

Other options are "consultant" (a vague title which can mean as much or as little as one wants) or to put her on the PR/Marketing side where all she really has to do is party and go to social events.

Offline BeorningTopic starter

Re: Some questions about rich people! (RP related)
« Reply #19 on: July 07, 2014, 06:57:35 PM »
Wow, some amazing information there!

I have a question about boards of directors: if I understand correctly, the people there don't have to be shareholders, right? But who elects those people - is it hard to get one elected? Or, if the biggest shareholders comes and says: "This is my daughter, put her on the board", then it happens without any fuss?

Also, are any qualifications usually needed for being on the board? Let's say the daughter in question only has BA in musicology - would it be considered crazy to put her on the board, or does stuff like happen?

Finally, I don't quite get how employees on the company can sit on the board? I mean, the board serves to oversee the CEO. Meanwhile, the company employees are subordinates of the CEO... Isn't it a conflict of interests? How can you oversee your own boss?

Offline consortium11

Re: Some questions about rich people! (RP related)
« Reply #20 on: July 07, 2014, 07:30:34 PM »
I have a question about boards of directors: if I understand correctly, the people there don't have to be shareholders, right?

No, although many will be; executives are often paid at least partially in shares in the company (especially for bonuses) and people who hold significant shares may want to sit on the board (or at least have a representative there) so they get a better view of what is going on and can have their views represented. But there's generally nothing that requires a board member to own shares in the company.

But who elects those people - is it hard to get one elected? Or, if the biggest shareholders comes and says: "This is my daughter, put her on the board", then it happens without any fuss?

In in a stock corporation (i.e. a company with shares) the shareholders elect the board. So if someone holds 50%+1 of the shares (technically the share votes but I'm simplifying) they can elect whoever they want, be it their daughter or a tramp off the street.

Where there isn't a single controlling interest (or enough allied shareholders to make a controlling interest) things can be more problematic, but generally only when things are going badly for the company. As a general rule most investors in major stock corporations are institutional investors; think investment banks, pension funds etc etc. They don't really care what's going on in the company as long as it makes money... if it's making money they'll tend to rubberstamp appointments, if they're not they might kick up a fuss or demand their own representatives on the board.

Also, are any qualifications usually needed for being on the board? Let's say the daughter in question only has BA in musicology - would it be considered crazy to put her on the board, or does stuff like happen?

Nope, especially at non-executive/outside director level. You'll frequently have non-executive board members with little to no relevant experience for the company they sit on.

Finally, I don't quite get how employees on the company can sit on the board? I mean, the board serves to oversee the CEO. Meanwhile, the company employees are subordinates of the CEO... Isn't it a conflict of interests? How can you oversee your own boss?

There's undoubtedly a certain amount of tension there. As a general rule companies either make sure there are enough non-employed directors to outvote the employed directors or limit the executive directors voting rights (at its most extreme, "ex-officio"; the executive directors are members of the board but have no voting rights at all). The benefits to the board of having someone "at the coalface" are generally seen as outweighing possible conflicts of interest.

Online Denivar

Re: Some questions about rich people! (RP related)
« Reply #21 on: July 07, 2014, 09:28:46 PM »
Most companies are stock companies. It's known as publically traded which means they're owned by the majority shareholder. Yes you can lose majority share and technically lose control of your company. Usually this is done by hostile take over and the company is parted out. 

This is a little inaccurate. Publicly traded companies are typically the largest, most valuable kinds of companies. However, most companies are much smaller, and held privately.

Very very few publicly traded companies have majority shareholders. Indeed many public companies are worth so much that even the world's richest couldn't afford to purchase a majority stake -- even the world's richest man, Bill Gates, owns "only" something like 20% of Microsoft, and thus has nowhere remotely close to a majority stake of the company.

There are many, many private companies that you and me have never heard of that are worth anything from a few hundred thousand to maybe a hundred million dollars. It is very common for these to be owned by an individual or small group of people, and these people might hand reins of the company to their children (and can do so quite legally).

Denivar

Online Orange Marmalade

Re: Some questions about rich people! (RP related)
« Reply #22 on: July 07, 2014, 10:19:39 PM »
Okay, thanks for the answers so far. It's all very helpful.

Now, I have a weird question about how rich people may think...

Basically: they own and / or earn a lot of money. I'd risk saying that they have at least a few times more money than one needs to lead a safe, relatively comfortable live. So... why don't they give this money away? Other people need it...

I'm not saying I'm a saint :) If I had that much money, I'd like spending it, too. I'm a weak man :) But, speaking for stricly ethical point of view... not giving that many for the poor seems wrong. And still, rich people don't do that. Why?

The above is not supposed to be offensive. I'm trying to understand how rich people think...

No matter how much you have, there's always more to be had. When I got my first full time job and was making $25k/year I thought I was living good. When I eventually got one paying $50k/year I wondered how it was possible that I lived on $25k. When I broke $100k, the feeling was almost exactly the same as before. As you get more money your expectations and sort of basic reality just shift. I imagine the same goes for the ultra rich - there's always someone richer out there to look at and dream of emulating. You might think that once you have a megayacht and a team of people to buy it that there'd be no need for more. But to someone with billions that's no different than someone in middle income wishing for that entry level luxury sportscar.

Very very few publicly traded companies have majority shareholders. Indeed many public companies are worth so much that even the world's richest couldn't afford to purchase a majority stake -- even the world's richest man, Bill Gates, owns "only" something like 20% of Microsoft, and thus has nowhere remotely close to a majority stake of the company.

While this is true, that doesn't mean that the companies don't have tiny groups of people or even a single person who basically control most of it. To use an example I used earlier, Buffett has ~20% stake in some very, very large companies. While 20% doesn't seem like much, that's a massive hammer you can swing to get your way, especially when most shareholders never cast a vote. Or how Murdoch owns like 40% of News Corp - while it is possible to oppose him, it'd literally take almost the entirety of the rest of the shareholders, most of whom would never be bothered to vote.

Offline BeorningTopic starter

Re: Some questions about rich people! (RP related)
« Reply #23 on: July 08, 2014, 01:16:12 PM »
Thanks for the answers again! :)

I have a very specific question: does anyone know how board meetings actually look like? Do they last minutes, hours, days? Are there specific roles members fulfil there etc.?

Offline consortium11

Re: Some questions about rich people! (RP related)
« Reply #24 on: July 08, 2014, 01:57:21 PM »
Thanks for the answers again! :)

I have a very specific question: does anyone know how board meetings actually look like? Do they last minutes, hours, days? Are there specific roles members fulfil there etc.?

How long is a piece of string?

There are relatively few rules regarding what constitutes a board meeting; I've been involved in board meetings in a lift, in the back room of a pub and walking down the street. In contrast I've also been involved in board meetings in the stereotypical boardroom at the top of a skyscraper. I've been in meetings that have listed 2 minutes, 10 minutes, 15 minutes, one hour, two hours, four hours and one that spread over four days (although frankly it could have been split into four separate meetings).

In general the more high-profile, large corporate the company you want to write about it, the more likely it is for board meetings to be quite formalised an likely last somewhere between one and four hours. But board meetings can and do take multiple different forms and last multiple hours.

There are only really two specific roles required within a board and even they aren't strictly necessary... the chairman and the company secretary. The chairmen is the head of the board, the figurehead of the company (although assuming it's a different person the day-to-day business will be run by the CEO type). The chairman's main role is, unsurprisingly, to chair the board meetings; i.e. to direct them and in some cases to have the casting vote but they also tend to take on a general PR role outside the boardroom as well.

The company secretary isn't part of the board and isn't really a secretary (although they may technically be required to do minutes for meetings) but they'll nearly always attend board meetings as they are responsible for the corporate governance of a company; in essence their role is generally to make sure that all the regulatory tickboxes with regards to corporate law and governance are completed.