How to make the stock market less of a casino

Companies should offer special dividends for long-term investors.

By Fred Beyer

from the October 28, 2008 edition

Point Pleasant, N.J. - Wouldn't it be great if the stock market were less of a casino – and more of a sound investment place?

There's a way to make this happen. And it doesn't involve a Bretton Woods II conference or new Washington regulations. Corporations themselves can seize this opportunity – and you and I can encourage them to take it!

Here's what I have in mind: Public companies should offer special dividends to investors that hold on to their stock without interruption for five years or more. That special dividend would be paid in addition to the regular dividend and even when the regular dividend was stopped for a period.

During this very shaky period in the market, investors need to get back to basics. Stock ownership isn't just about buying low and selling high soon after. It's about long-term ownership in a company you're proud of – and sharing in the profits via dividends.

Amid all the anxiety about short selling and hedge funds, this step would be very beneficial. It would promote stability through buy-then-hold strategies. It would bring scared investors back to the market. And it would move people away from mere stock price speculation and toward ownership and profit-sharing. Firms and investors would benefit – which is good for the broader American economy.

Which companies will lead this effort? Certainly not the financial institutions that are willing to borrow 30 to 40 times their own capital to make investments. This smells like gambling!

The American people would like to feel that the nation's corporations were governed by boards that exercise wisdom, economy, and concern for mankind. They would like to trust to these boards the ability to rein in any excessive appetite for personal gain on the part of their high-ranking executives.

They should be given the opportunity to prove their value to the corporation and to the shareholders. Creating a special dividend for long-term investors would give them that opportunity.

I've pitched this idea to high-ranking officers in a dozen public companies. I'm encouraged with the response I've received so far. The first company that actually offers a special dividend for long-term investors may find that the public response is encouraging, too.

• Fred Beyer successfully launched a bakery from his home. He remains grateful that he was able to borrow money for expensive equipment, pay it off, and incorporate.