|WikiProject Business / Accounting||(Rated Start-class, Top-importance)|
|WikiProject Economics||(Rated Start-class, High-importance)|
Bad thinking: If you search for "earnings", you'll be redirected to this page. But there is no definition or discussion here of the term earnings. This would be helpful, since I understand that the term has different definitions in different English-speaking countries.
I removed this paragraph:
- In corporations, income is not exactly synonymous with the way most people think of profit. In the minds of most people, if a person selling lemonade that costs him 3 dollars and which he sells for 5 dollars, he makes a profit of 2 dollars which he keeps himself. Lets say that he decided to make his business a corporation and sell all of it, but became CEO. The next year he sells 5 dollars worth of lemonade, his salary (what he gets paid by the company) is one dollar, and the cost per lemonade is still 3 dollars. Now the income is the 1 dollar left over. Critics of the concept of a corporation says that in practise they must still pay the guy 2 dollars, the same as he would make if he fully owned the company, otherwise he would leave. This would force the company to raise costs or introduce other means to keep his pay the same, and critics argue that this is a fatal flaw in the concept of a publicly traded corporation.
This long story is unnecessary; distilled, I think it is saying CEOs think they own the company, and should be compensated accordingly. I don't actually know any critics who make this rather naive argument at all. Tempshill 01:27, 14 Feb 2004 (UTC)
No this is not the point Im trying to make at all. Rather, it is trying to show the disconnect between what people normally think of as "profit" and what is known as income. The main issue is with the economic efficiency of a corperation. Lets take for example that a corperation buys out a local run bakery. Whereas the profit was essentially the "pay" for the guy who owned it, now the guy who runs it is probably going to be getting that amount of pay anyway, and the shareholders are going to be getting their cut. In order for them to get anything, either the price has to go up, or they have to be doing something more efficient. This paragraph is just trying to put the system into perspective, most people colliqually have a very wrong understanding of companies, corperations, publically traded corperations, etc.
- If I understand you correctly, you seem to be saying that a corporation has more overhead to pay, in the form of shareholders, CEO, etc. than a sole proprietorship and also that these corporate expenses disguise reported income relative to the income of a sole propriator. Both of your claims could be true under certain circumstances, but I don't think we can make them as general claims. What we are seeing is a division of labour. A sole proprietor if performing the dual function of managing the enterprise and contributing investment money. In a corporation the CEO does the management while shareholders invest most of the money. In your example above, the $2 earned by the sole proprietor should be seen as $1 for his management activities and $1 for his financial investment that makes the business possible. mydogategodshat 10:24, 18 Feb 2004 (UTC)
Dr. Meon's comment on this article
Dr. Meon has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:
-The article is short and sketchy.
-"Income per capita has been increasing steadily in almost every country". Growth has been shown to be uneven in general. See: Pritchett, Lant. "Understanding patterns of economic growth: searching for hills among plateaus, mountains, and plains." The World Bank Economic Review 14.2 (2000): 221-250.
Moreover some countries have seen their GDP decrease, during recessions or conflicts. The statement should therefore be deleted.
We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.
We believe Dr. Meon has expertise on the topic of this article, since he has published relevant scholarly research:
- Reference : Axel Dreher & Pierre-Guillaume Meon & Friedrich Schneider, 2012. "The devil is in the shadow. Do institutions affect income and productivity or only official income and official productivity?," Working Papers CEB 12-019, ULB -- Universite Libre de Bruxelles.