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.
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 ot the local Golden Arches.
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 he
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.
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?"
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 shared."
"But I could 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 of 694 million parts of each hamburger."
"That's hard to
imagine," said Toad. "That little bit wouldn't fill me up."
"And the same
would be true for the company's buildings, stoves, and furniture.
You would own only one 1/694 millionth of each thing."
"Well, maybe I
could decide 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."
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 profit 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 loosing your money. Any business is risky and
someone has to bear that risk. That's what stockholders do as owners
of a business."
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--bite 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
"I'm sorry," Toad
replied. "I just thought that the chocolate flavor would take care
of the problem."
Questions for Discussion
How many people own McDonald's?
Why would people wish to buy McDonald's stock?
How do you become an owner of McDonald's?
What are the benefits of stock ownership?
What are the risks of stock ownership?
Will McDonald's accept Toad's suggested menu?
How do profits help McDonald's?
Council for Economic Education, New York, NY
Learning from the Market: Integrating SMG Across the Curriculum, Lesson 3
Stock Ownership, MacDonalds: Economics Lesson