An OTC is created when the constitution of a corporation transfers the rights of all the initial shareholders to others without cost at a set rate of say five per cent per year after the first dividend. The rights of the initial shareholders would then terminate twenty years later. The initial shareholders of an OTC would typically obtain greater profits if the tax rate for OTCs were reduced by around ten percentage points. Such a tax incentive would provide a basis for the voluntary introduction of the OTC concept.
Gold mining corporations have limited life but many have nurtured new corporations in other activities. A well-known example with its origin in Australia is British Petroleum Limited.
Naturally occurring limited life corporations illustrate the practicality of the OTC concept. Many developing countries require foreign enterprises to be constituted on a limited life basis. The French and German forms of corporation evolved with limited life to meet commercial needs.
However, in England, corporations such as the East India Company and the Hudson Bay Company were created with unlimited life as an instrument for colonising foreign lands. It was for this political reason that other imperial powers gave their corporations unlimited life in the 19th century. This political attribute is no longer appropriate or required in corporations.
If humans are to colonise this planet on a sustainable basis, enterprises will need to be sensitised to preserving nature - an outcome which will require corporations to develop on a human scale and be owned and controlled by their stakeholders. Stakeholders are those people whose lives are affected by the corporation. They would include shareholders, employees, suppliers, customers and host communities.
OTCs create a mechanism to localise the ownership and control of corporations and so a means to decentralise wealth and power.
OTCs provide a technique for introducing: employee ownership, corporate self-governance, greater efficiency in the capital markets, more foreign investment with foreign ownership fade-out, and a highly efficient means for technology transfer. They would substantially reduce the need and motivation for corporate take-overs, asset stripping, 'greenmail' and so the need to regulate the securities industry closely.
OTCs would create a boom in the securities industry as all profits would be distributed and corporate growth would be financed by the capital markets. The substantial cashflows distributed by mature OTCs would be redirected by both its initial and new shareholders into its corporate offspring and other new businesses. OTCs create a means to programme change and progress on a sustainable basis into the corporate engines of society.
Shann Turnbull, GPO Box 4359, Sydney, NSW 2001, Australia (tel 612 233 5340). This suggestion won a Social Inventions Award.