Wikipedia:Reference desk/Archives/Humanities/2015 August 8

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August 8

Closing down the shop. A big shop.

Many large companies have gone bankrupt over time - for instance, Kodak, but do large companies ever decide to sell their assets and dissolve themselves the way a small business person might? I'm thinking of companies that think they can't innovate enough to survive, but it could be for other reasons. 188.247.76.211 (talk) 19:37, 8 August 2015 (UTC)

Yes—Lehman Brothers and Woolworths Group are probably the most spectacular recent bankrupt companies to close the doors and fire all the staff because they were unable to find a buyer or provide a credible restructuring plan. I assume from the fact you mention Kodak that you're asking about the US, in which case Chapter 7, Title 11, United States Code explains the actual process of dissolution. – iridescent 19:55, 8 August 20188.247.76.211 (talk) 22:13, 8 August 2015 (UTC)15 (UTC)

I may not have formulated my question clearly. I am wondering about big companies that voluntarily, while liquid, just decide to stop trading. (And I'm Canadian, but interested in any huge company anywhere.)188.247.76.211 (talk) 22:13, 8 August 2015 (UTC)

Any large company that is a going concern—i.e., not facing likely bankruptcy—would seek a buyer if its shareholders felt they no longer wanted to operate the company. Simply liquidating a company and selling off its assets would bring in less money then selling the company intact, because of all the intangible assets, like institutional knowledge and goodwill, that operating companies have. You can see this demonstrated when a publicly-traded company is acquired. The acquisition price is very often above the acquired company's market cap, which represents the price it would cost to simply buy outright every share of the company's stock. Partially this is because if someone actually tried to do this in the market, the market would react, and people would start asking for more for their stock, driving the share price up, but also this is often in recognition of the company's intangibles. Because of this fact, that you would get a lower price by liquidating the company, it would be a likely breach of their fiduciary duty if the board and/or executives decided to do this without a very good reason. Now, small companies liquidate fairly often, but these are usually personally-owned or privately held small businesses, say, a doctor deciding to retire and close down her practice. --108.38.204.15 (talk) 23:31, 8 August 2015 (UTC)

The Beatles were a financially viable business, but chose to dissolve. DuncanHill (talk) 10:27, 9 August 2015 (UTC)

They dissolved the partnership for the band itself; but many assets of the Beatles continued to operate; like Apple Corps and Northern Songs. Even down to today, Apple Corps has four primary shareholders: the two living Beatles, and the estates of the two ex-living Beatles, and is quite a viable business. --Jayron32 23:06, 9 August 2015 (UTC)

It does occasionally happen that a large solvent business has tangible assets that are worth more than the value of the business as a whole, and the decision is made to sell the business. When this occurs, however, the business almost always looks for a single buyer, or at least a small number of buyers. There is considerable loss of value in the liquidation and winding up process, and a single buyer can be expected to pay something much closer to the full value of the assets. John M Baker (talk) 13:41, 9 August 2015 (UTC)

Resolved

Although this has been marked resolved, I'd like to add one point. There are cases where a company's assets might have more short-term value than the company as a whole: for example, Trans World Airlines, which owned lots of aircraft (and even better, the rights to the London-New York flight path) but struggled in the 1980s when air markets were deregulated due to structural inefficiencies. This meant that it was possible for Carl Icahn to take control of the company, take it private at great profit to himself, sell off its valuable routes, then have the company declare bankruptcy and claim another $190 million as a creditor, and then use that to get the right to sell TWA tickets at nearly half-price! This process is called asset stripping, and although it's not directly part of the winding up process, it almost inevitably ends up killing the company and resulting in massive job losses. Smurrayinchester 13:44, 10 August 2015 (UTC)

Also relevant, Icahn was the model for the character Gordon Gecko and the plot of the film Wall Street (film). --Jayron32 16:56, 10 August 2015 (UTC)

Wow, even more

Resolved

188.247.76.211 (talk) 19:25, 10 August 2015 (UTC)

Tipping & Sales Tax

Why is it considered common practise in certain countries to expect people to tip poorly paid staff. Why are more people not annoyed by the fact that they're coerced into subsidising low pay? Also, are there campaigning efforts in countries such as the United States to ensure that the wage paid to waiting staff is sufficient for them to live on. In the UK, where I'm from, the expectation is that you tip a job well done - in other countries, and some very high-end restaurants in the UK, it doesn't seem to be optional. This article suggests that service industry employment in restaurants, in the US at least, is a huge burden on American taxpayers, so I don't understand why more isn't being done. --Andrew 2:59 pm, Today (UTC−5)

More being done by who? GregJackP Boomer! 21:29, 8 August 2015 (UTC)

On another topic, I don't understand why the United States doesn't have a flat sales tax - if you're a US citizen and you wanted to purchase the exact same thing in a different states, I don't understand why you should have to pay either the price of the item or the price of the item plus up to eight percent. I also don't understand why congress doesn't force businesses to display their prices inclusive of tax, rather than finding out when you're at the checkout - as it is, it seems very misleading.

Sorry to rant, I'm going to Florida in september and have just come across these things, which seem completely alien to me. Coould somebody explain to me why the US has these in place, and is there net benefit to them--Andrew 19:59, 8 August 2015 (UTC)

Look, I don't care if you add stuff, but don't alter your original post after someone has responded to it to make it read in a different manner. Congress doesn't force it because the people won't stand for it. Congress has limited powers. GregJackP Boomer! 23:14, 8 August 2015 (UTC)

• Sorry about that. Why would people not stand for knowing the price they pay for an item before they go to the checkout?

• People who want to enact change, of course - pressure groups, lobbyists, those who believe in equality. It's deeply unfair to the consumer and to the employee.

When I was a restaurant server in Montreal (where our salary was legally below the Quebec standard minimum wage) I earned so much more in tips that I wouldn't have minded not having a salary at all. I certainly wouldn't have traded my tips for a 'living wage' salary.188.247.76.211 (talk) 22:16, 8 August 2015 (UTC)

As an American, the answer to your second question is because American political culture has always been deeply suspicious of centralized power. We started with an armed revolt against a government, after all. Limiting centralized government power is the impetus behind our whole federal system. State and local governments set their own sales taxes, and different governments set different taxes. Any proposal for a national sales tax would face strong opposition from people who would dislike giving that power to the national government and imposing a single tax rate across the whole country. We needed to amend the Constitution to impose a national individual income tax, because the Constitution otherwise requires all "direct taxes" levied by the national government to either be assessed equally per state, or assessed based on each state's population. --108.38.204.15 (talk) 23:08, 8 August 2015 (UTC)