Stockholders vs. Workers?

[The Intransigent Faction]

Well, comrades, I got into an actually productive discussion this evening with my grandfather about wage labour. It was quite lengthy and I've got exams to study for so I may not mention everything or read responses until later this week, but:

It started with my grandparents, my sister and I watching a Russia vs. Greece soccer game. The announcer made some sort of comment and I caught the words "Soviet Union". I spontaneously mentioned a study that found that older Russians tend to actually miss the Soviet Union. My grandmother made a comment about understanding nationalism but that the Soviets were "repressive".
I countered by mentioning the social programs (free health care, education, etc.), explaining the LTV, and asking which system was truly more repressive (not defending anything bad the Soviets may have done, but given the proposed alternative..the issue was about whether a free-market as opposed to controlled market provides a more respectable living).
My grandfather was the skeptic in this case. He started off by saying "I agree with you that some people live in poor conditions and that the income discrepancy is ridiculous. BUT..let's look at General Motors, for example:The unions are demanding too much. Their asking for wages so high that GM can't afford to pay the stockholders."
According to him, the "Company" is the stockholders. He said that nobody can start a business (entrepreneurship) without getting help from investors who will expect some sort of return for their contribution. I suggesting using the manger's salary and he said that even that wouldn't be enough to meet the stockholder's demands and the "excessive" demands of the unions. Interestingly, he related to me the words my great-grandfather told him when he was my age, that "The unions are becoming too powerful".
That's the gist of it, I suppose. If i have time and/or recall something I left out, I'll add that later. My grandfather's been an accountant for decades and economics tend to be my weak-point, which hopefully didn't impair my relating of a summary of the conversation. I'm by no means comparable to him in my knowledge of the market. So I'm wondering:
-Is he really correct that even the "entrepreneurs" don't have enough money to fairly pay the workers and still provide a return on investments?
-Are stockholders really needed? Does their "investment" really merit compensation on a remotely similar level to the workers who performed the labour? Can't we just have a system where someone is rewarded on the basis of the labour they perform and not on paper currency in any way?
Actually, I asked this to my grandfather and he responded that the investors are working for other companies, so they should be able to gets cars without necessarily being involved in their making since that's not their field of enjoyment/expertise.
I see now that I should have said "Yes, they (society) should be able to benefit from the products of labour collectively." but instead I was stuttering and trying to figure out the details of the purpose behind stockholders. I guess I was focusing too much on the problem with currency itself and trying to figure out how to explain properly that a "reasonable" constant wage of a certain amount per hour would gain and lose value depending upon inflation etc. We ended it there and said our goodbyes with me conceding for now since he had to leave. That's all I can really remember for the moment.

[gla22]

well in a socialist situation either workers would pool their capital or they would get a no interest loan from the state if their business plan is approved.

[Demogorgon]

Companies sell shares when they need to raise extra capital. Big companies tend to do it more than smaller companies as investors will have more confidence in them. The money raised for most investment from new firms actually comes from bank loans or bonds (Government grants too these days).

A company will usually prefer to issue bonds in return for investors lending them money because it means they don't have a long term commitment. Selling stock after all means selling a portion of the company to outsiders. However quite often companies do have to sell shares in order to raise funds. These funds are used for new investment in almost all cases. If a firm is selling shares in order to meet its salary obligations it is likely to go bankrupt fairly soon.

You have to understand the position shareholders hold in the system of exploitation. It is not exactly the managers of a firm who do the exploiting, but rather the owners. The income the owners receive is called profit and that comes from extracting surplus value from the workers. In a situation where a firm is privately owned and there is no stock traded, the money belongs to whoever happens to own the firm. In the case of a publicly traded firm, which has stockholders, the profits that the company does not put into new investment must be split between the shareholders according to how many shares they own. This is called a dividend.

You have to remember of course that that does not mean that shareholders are bad people. Most people will have some shares, at least indirectly, because that is where pension funds are invested so that they can grow, it is those who own large amounts of shares-most capitalists-who are the problem.

Anyway, what you should say to your Grandfather is that the problem of companies needing shareholders in the first place comes from a flaw in (most types of) capitalism that requires investment funds to be privately made. You can then argue that if society were to collectively raise and allocate the investment, workers would be able to receive a larger income.

Such an argument is not even specifically Communist in nature. A few Capitalist societies have adopted a similar approach. In Japan, for instance, while there still is a ridiculously big stock market, it is not as important as it is in the west because much of the investment money comes from taxation and is allocated by the Government. That is the reason why Japan has a much lower wealth gap than places like America.

Once you have demonstrated that, you can argue that society should go further still in that direction until you get to the point where you are arguing for socialism.