Is it meaningful to talk about the ownership of companies?

Shareholders own the corporation, and the duty of the directors to maximise shareholder value follows from that. I have lost count of the number of times I have been told “that is the law”.

But it is not the law. Certainly not in America, as Lynn Stout, a professor at Cornell University Law School, has pointed out.

Shareholders in England have more rights — but even there, the obligation of a company director is to promote the success of the company for the benefit of the members. The company comes first, the benefit to the members follows from its success.

And English shareholders are definitely not owners. The Court of Appeal declared in 1948 that “shareholders are not, in the eyes of the law, part owners of the company”. In 2003, the House of Lords reaffirmed that ruling, in un­equivocal terms.

 

.. There is a stronger case for asserting that a company is “owned” by its directors than there is for its shareholders.

.. So who does own a company? The answer is that no one does, any more than anyone owns the river Thames, the National Gallery, the streets of London, or the air we breathe.

.. As Charles Handy has written, when we look at the modern corporation, “the myth of ownership gets in the way”. Clear thinking about business would be easier if we stopped using the word.