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STOCK OWNERSHIP: A DELICIOUS TOPIC
Toad is Maria's best friend, but sometimes his impractical schemes are a
bit much, even for Maria. Yesterday was a good
example. He embarrassed her at McDonald's just because he was
ignorant about stock ownership and insects. Stock ownership and insects?
Yes. It all started when Toad stopped by Maria's house and asked her
to go to lunch at McDonald's. "Nothing like fries and a burger and
something special for lunch," he said, as they walked over to the local
Golden Arches. "Something special?" she asked. But he just ignored
her as he hopped along, carrying a carefully folded brown bag. At the
restaurant, Toad offered to buy lunch. He asked Maria to find a table
and to guard his brown bag. "Don't look inside, it's a surprise," he
said. That should have been enough warning, Toad buying lunch and
asking her to guard a brown bag; but she just went along with everything
because her brain was temporarily locked in the numb position. Shortly he
joined her at the table with the food and a sour mood. "What is the
matter?" she asked. "Didn't they give you good service?" "Oh, yes,"
Toad grumped, "but apart from the service she was so uncooperative! I
said I wanted to see the owner about this great idea of mine, but she said
she was the local franchise owner. I said, 'so you own all the
McDonald's in the world?' And she said, 'No, it is impossible to talk to
those owners.' Then she started waiting on the next customers.
She's so rude!" Toad moaned. "Actually," Maria replied, "she is right.
There are 226,656 owners of McDonald's. Maybe you should become an
owner." "That's a great idea," Toad replied. "Then I could have the
restaurants serve my favorite foods and I could eat free. If I own the
business, then I get to run it my way, right?" "Not exactly," Maria
replied. "I learned a lot about ownership and business by surfing the
Internet. If you want to become a part owner of McDonald's, all you
have to do is buy stock in that company. You become a part owner of
the company, but many other people will also have bought stock in the
company. So you are only one of many people who share its ownership.
That's why stocks are called shares." "But I would only eat a tiny share
of all the food McDonald's cooks each day," said Toad. "As a part
owner, couldn't I eat part of their food?" "No, you couldn't.
McDonald's has close to 694 million shares of stock. That means that
the ownership of every hamburger McDonald's produces is really divided into
694 million parts. If you buy one share of stock, then you would own
one 1/694 millionth of each thing." "Well, maybe I could decided what food
to put on the menu if I were an owner of McDonald's stock," Toad said.
"They are really missing a sure bet by not offering a more varied menu."
"Actually, you can't do that either," Maria replied. "For each share
of stock, you get one vote for the company's top managers, or directors.
With so many owners or stockholders, you by yourself would not have a big
influence on what the company offers as its menu. Actually, managers
run the company for you and the other stockholders." "So what would I get
for buying a share of stock in the company?" asked Toad. "It doesn't
sound like much of a deal to me." "Each share of ownership entitles you to
some of the profits the company earns," she explained. "But profits is
not a sure thing. If people don't like the food, the company wouldn't
earn enough money to cover the costs and earn a profit. Any business
is risky because the future is uncertain. A company could spend lots
of money for buildings, equipment, or developing a new product. But if
customers don't like the product or if prices are too high or products of
other restaurants are more attractive, business income will be too low.
Success is never a sure thing, so there is always a chance of losing your
money. Any business is risky and someone has to bear that risk.
That's what stockholders do as owners of a business." "Sounds exciting,"
said Toad. "So why buy a stock and risk losing money?" "Because you
can make a gain also. You think the business will earn a profit on the
product, so you take the risk. The possibility of earning a profit
gives the owners and managers of a business an incentive to produce
something consumers want to buy at a price they are willing to pay. If
the business succeeds, its owners will earn a profit. That is the
reward stockholders get for risking their money. Customers also
benefit because they get something they like. Employees of the
business benefit because they have a place to work and earn income.
It's like they're all on one big team with the same goal. But owners
are the only ones who risk their own money on whether the goal is
accomplished." "So by buying a stock," Toad said, "I become a business
owner who takes part of the risk that the company might fail. But if
the company succeeds, I may get some of the company's profit. I'd like
to do this, because I know McDonald's could make a profit from my new menu
idea. It's tasty, inexpensive to produce, and everyone in my family
likes it." Then Maria asked the fatal question. "Toad," she said,
"what is the food you think McDonald's should have on its menu?" "Look at
this great stuff!" Toad shouted as he opened the bag and dumped the
contents onto their food plates. "Over at Windy Willows Community
Center where all my relatives live, this is our favorite food. Try
some. It's got chocolate on it. I know you will like it." The
food was very small - bit sized - and very tasty. The chocolate taste
dominated, but Maria noticed an unusual aftertaste that was not unpleasant.
Other people sitting nearby were interested, so Toad also shared it with
them. Even the franchise owner came over to see what the fuss was
about and tried some. Everything was going great until someone asked,
"What is this food?" On the way home Maria was mad enough to spit.
"How could you embarrass me that way? You know most people do not like
to eat ants, flies, mosquitoes, and earthworm parts. Now we can never
go back to that McDonald's Restaurant! I know for sure McDonald's will
never hire you to decide on their food menu. Can you imagine what
would happen to their sales if they served your food?" "I'm sorry," Toad
replied. "I just thought that the chocolate flavor would take
care of the problem." Questions for Discussion
Complete the questions on this worksheet
with your group. Happy Birthday, Cookie
When April 2 rolls around again, why don't you celebrate the birthday of an
old friend? On that day in 1912, the Nabisco company announced "three
entirely new varieties of the highest class biscuit packed in a new style."
The company described the new cookies - or biscuits, as they were then
called - in the following way: The Mother Goose legends; the Veronese
biscuit was "a delicious, hard, sweet biscuit of beautiful design and high
quality; and, finally, the Oreo was "two beautifully embossed,
chocolate-flavored wafers with a rich cream filling." The
Oreo has become a familiar friend to all of us, but the other two "biscuits"
were never popular. So Nabisco stopped producing them after a few
years. It was not the Mother Goose or the Veronese cookie that rose to
fame and is now dunked in milk, crumbled in ice cream, or rolled into hungry
mouths. Because people like Oreos so much, the company sells
more than five billion of these little sweeties every year. but where
did the unusual name Oreo come from? Maybe it came from the first
chairman of the National Biscuit Company, Adolphus Green. He knew that
oreo is the Greek word for mountain and that in early testing the cookie
actually looked like a little mountain. Or perhaps the name came from
the French word or, with means gold, an important color on the original
label. We don't know where the name came from, but we do know
that Nabisco was one smart cookie when it came up with the Oreo. But
being top cookie is tough. Who knows what might happen?
Consumers could start eating fewer sweets, and the company's production
costs could push prices out of reach for many buyers. The business is
also very competitive, for there is always another tough cookie ready to
take Oreo's place in our hears and stomachs. But, so far, Oreo hasn't
crumbled.
Questions for Discussion 1. When
Nabisco introduced its new cookies in 1912, Nabisco stockholders assumed a
risk that was similar to Toad's risk in wanting to sell chocolate insects.
What was that risk? 2. Why were stockholders willing to assume this
risk? 3. Did the risk-taking turn out to be worthwhile for Nabisco's
stockholders? Why or why not? 4. Did the risk-taking by
Nabisco's stockholders benefit the company's customers and employees?
Why or why not? 5. If you owned stock in the company, would you be
entitled to take a package of Oreos from the supermarket whenever you
wanted? Why or why not?
THANK-YOU NOTE After talking with Toad, Maria
thought more about stocks, profit, and risk. She also thought about
the $500 her Aunt Elizabeth had given her as a gift for making the school
honor roll. She talked to her parents about what to do with the money
and then she decided to invest it in stock. Pretend that you
are Maria. Write a letter to your Aunt Elizabeth and thank her for her
gift. Explain that you have decided to use the money to help buy
shares of stock in a business. Aunt Elizabeth might be made uneasy by
the news of your decision to buy stock. She keeps all her extra money
in a savings account. Anticipate Aunt Elizabeth's concerns.
Explain why you think making good use of the money, even though stock
ownership involves risks. |
