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• The Chief Information Officer (“CIO”) also referred to as the Information Technology (IT) Director , is a newly created executive position responsible for the company’s computer systems, including the very important job of cybersecurity.
Limiting Personal Liability Engage students in a discussion: Who would be willing to risk starting a business if failure of the business could land them in prison? Who would be willing to start a business if failure meant you could lose all of your personal property? Do you recall from history class how, in the old days, owners of failed businesses could languish for years in debtor’s prison or indentured servitude, or face seizure of their assets in the event their business failed and money was owed to creditors? Nowadays, jail bars are long out of the equation. One of the reasons commerce thrives under capitalism is because laws of commerce (commercial laws) protect corporate owners from personal liability for the debts of the business in the event the business fails. By eliminating that risk, more people are likely to start a business or pursue innovation. As shareholders, corporate owners risk loss of their shares in the company if the company fails. However, they cannot be forced to sell their personal assets, like their home or car, or drain their personal savings to pay off the debts of the corporation. Officers and directors enjoy the same protections. A failing company may seek bankruptcy protection to reorganize and eliminate debt, or liquidate (sell) assets to pay off creditors. Enabling Growth When a startup, or even an established, operating company wants to grow, it needs to raise money. In the business world, money used to fund growth is referred to as capital . However, no one is willing to invest in (give money to) a startup without getting something in return. Corporations are able to attract capital by issuing shares of stock in exchange for investment . What if it’s not just money a startup needs to attract? What if it needs to hire talent or buy equipment? Many cash poor, but promising startups are able to attract highly qualified employees by offering shares of ownership in the company to compensate for a lower salary . Shares of stock can also be issued in exchange for property , such as land or equipment. For example, let’s say your startup has found a perfect facility for your business. It’s an office and manufacturing building on the edge of town. It’s just the right size, and its location near public transportation makes it convenient for the employees you expect to hire. However, you do not have enough cash to pay for it, and your status as a startup with no income or earnings history, makes banks unable to loan to your company. You approach the property owner and offer her shares in your corporation in exchange for the property. She is knowledgeable about growth potential in your industry, and is impressed with your management team and product. She agrees to sell you the property for shares of stock instead of cash. If all goes well, the shares will eventually provide her with a much higher return on investment (ROI) than the sale price of the property. The ability to issue shares is a powerful tool for growth . SLIDE 12J SLIDE 12K PRODUCT PREVIEW
223 THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
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