The Proposition

The greater the payroll injected into the local economy, the better for all. Yet our current system limits wages because investors’ profit is considered paramount and wages a detraction from the bottom line. The cumulative negative impact of this practice is starkly apparent. Therefore, one of our goals is to enable more money into circulation.

The Challenge

Commonwealth Group's holding companies should be able to provide a return on investment that rivals Wall Street’s, but our holding company structure focuses on equity growth, not in the income it can extract from its portfolio companies. Since that potential income represents the easiest valuation mechanism, how can we have our cake and eat it too, i.e. maximize the financial bottom line AND the amount of money that goes to employees (the social bottom line)? include a second bottom line to measure their performance in terms of posi- tive social impact. For the BDC, that means sharing some of the profit with employees, thus injecting more money into the local economy.

The Solution 

  • We follow convention in minimizing expenses (including salaries) and maximizing profit. 
  • Reserves are set aside for the future needs of the subsidiary businesses.
  • Remainder is distributed via profit sharing and employee stock ownership plans (ESOP) to employees.

The Value

We propose that in addition to a conventional valuation formula based on the financial bottom line, the leadership of the holding company develop a parallel formula that reflects some multiple of the company’s employee profit sharing/ESOP, perhaps augmented by the local taxes it pays and other similar components that can be traced to injecting money into the local economy. The more the company contributes to the local economy, the higher the community would value it, increasing the equity growth of the holding company and benefiting shareholders when they sell their holdings.

The Long Term

BDC provides ongoing support services and resources to portfolio companies, offering a spectrum of knowledge, tools and assistance including systems infrastructure consulting, capital, strategic growth strategies and more.

Determining Value

Valuation of private companies is a common problem and there are many formulas for calculating valuations, which can be tied to assets and/or income and/or profit, for example. Berkshire Hathaway normally buys public companies, and so has a starting value for those acquisitions based on their existing public stock price. Our public companies need to come up with what is termed the “fair value” of the company, determined by the holding company’s management and board of directors, assisted by internal auditors and third-party valuation firms.


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