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100% of a company's earnings legally belongs to the shareholders That's simply not true. Next you'll be telling us it's illegal for a company to do anything th

100% of a company's earnings legally belongs to the shareholders That's simply not true. Next you'll be telling us it's illegal for a company to do anything that isn't about maximising shareholder value.

kgwgk 7y ago
Who do they belong to if not to the owner of the company?
- EliRivers 7y ago
  "Shareholders" and "owner" are not synonymous terms. Shareholders don't "own" the company; they hold shares in the company. https://www.lawschool.cornell.edu/academics/clarke_business_law_institute/corporations-and-society/Common-Misunderstandings-About-Corporations.cfm https://www.lawschool.cornell.edu/academics/clarke_business_... "First, shareholders do not own business corporations, nor do they own the assets of the corporate entities... Shareholders own shares." Somewhere back in the eighties, it became popular in the business community to say that the purpose of a company is to maximise shareholder value. That opinion and others like it have now so saturated society that people take it as received truth, but it's not. Likewise the idea that shareholders are owners. Now, as in many things, laws do change over time and if enough people continue to believe this hard enough for long enough, there will eventually be enough case law that it ultimately become true. One day, it might be true, and law. That day has not yet come.
  - kgwgk 7y ago
    You are right at least in part, strictly speaking the owner(s) of a company do(es) own its assets only in an indirect way. But I don't get the "shareholders do not own business corporations" bit. Would a sole owner "own" a business corporation? Do real estate owners "own" real estate or do they own "bundles of intangible rights"?
    - EliRivers 7y ago
      But I don't get the "shareholders do not own business corporations" bit. Well, why would they? At risk of horrifically simplifying things, I have a company, I decide I want some more money. I sell you the right to vote in some things that concern the company, and I sell you a share of any dividends that get paid out in the future. That's what you get. Do you now own the company? Do you own the company assets? I didn't sell that to you. I sold you the right to vote in some company meetings and decision making processes, and I sold you a piece of any future dividends that get paid out to you and others like you. Doesn't sound like "owning" something to me.
      - kgwgk 7y ago
        > I have a company What does that mean? You don’t “own” the company, do you?
        EliRivers 7y ago
        Certainly not in the same way that I can own a pen or a nice wristwatch. Now we're getting somewhere! So what does it mean to "own" a company? If the company is just me and a bag of tools, fixing people's cars on their driveway, do I own that company? What does it even mean for me to "own" it?
        Gibbon1 7y ago
        You're making a good argument to point out that 'ownership' takes a lot of different forms. And an interest in one class of thing isn't the same as others. Ownership comes with differing, restrictions, rights, and responsibilities depending on the thing. An opinion of mine the ownership of a company through stocks is secondary to stocks being a quasi-cash financial instrument like bonds.
dorchadas 7y ago
Wasn't there that Michigan Supreme Court decision that states that was precisely the purpose of a company -- to maximize shareholder value?
- EliRivers 7y ago
  You're thinking of https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co. , which was literally a century ago. If you scroll down to "Significance", you can read for yourself that it's by no means universally accepted ("that this interpretation has not represented the law in most states for some time"). Let's come forwards a little; as the U.S. Supreme Court recently stated, "modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so." Where this is basically going is that the common belief - that there is some clear, absolute law that totally says the shareholders are the owners and the company is all about giving money to them - simply isn't true.
  - dorchadas 7y ago
    Thank you! I just remember reading about it before, but didn't know much more. Thanks for the info, and definitely glad that's changed!
darawk 7y ago
It is true. The company is owned by its shareholders, collectively.
- EliRivers 7y ago
  Even if they did "own" the company (which they don't, unless you choose to define the terms identically - "owner" and "shareholder" are not synonymous), just owning a company doesn't mean all the earnings belong to you. Here's some legal people on the subject; https://www.lawschool.cornell.edu/academics/clarke_business_law_institute/corporations-and-society/Common-Misunderstandings-About-Corporations.cfm https://www.lawschool.cornell.edu/academics/clarke_business_... Key phrases include "shareholders do not own business corporations, nor do they own the assets of the corporate entities". Now, there are other opinions, but the very fact that this is an ongoing discussion suggests strongly that it is not as cut and dried as you claim.
  - deleted 7y ago
    [deleted]
  - darawk 7y ago
    They do, collectively, own most companies. It is possible to create shares that do not represent an ownership interest, but most companies are structured such that they do. Shareholders are generally able to reconstitute the board, which can appoint a CEO, who is in control over the assets of that company. They may then appoint a board, who would appoint a CEO who would liquidate the assets and return them as a dividend to the shareholders. That is the sense in which they own the company. Now, some companies sell shares that don't have voting rights (e.g. Google, Facebook). Those are a bit more nuanced. Though even in those cases, there are voting shares, they're just not traded in the public markets. So, the statement that the company is owned/controlled by its shareholders remains correct.

kgwgk 7y ago

Who do they belong to if not to the owner of the company?

EliRivers 7y ago
"Shareholders" and "owner" are not synonymous terms. Shareholders don't "own" the company; they hold shares in the company. https://www.lawschool.cornell.edu/academics/clarke_business_law_institute/corporations-and-society/Common-Misunderstandings-About-Corporations.cfm https://www.lawschool.cornell.edu/academics/clarke_business_... "First, shareholders do not own business corporations, nor do they own the assets of the corporate entities... Shareholders own shares." Somewhere back in the eighties, it became popular in the business community to say that the purpose of a company is to maximise shareholder value. That opinion and others like it have now so saturated society that people take it as received truth, but it's not. Likewise the idea that shareholders are owners. Now, as in many things, laws do change over time and if enough people continue to believe this hard enough for long enough, there will eventually be enough case law that it ultimately become true. One day, it might be true, and law. That day has not yet come.
- kgwgk 7y ago
  You are right at least in part, strictly speaking the owner(s) of a company do(es) own its assets only in an indirect way. But I don't get the "shareholders do not own business corporations" bit. Would a sole owner "own" a business corporation? Do real estate owners "own" real estate or do they own "bundles of intangible rights"?
  - EliRivers 7y ago
    But I don't get the "shareholders do not own business corporations" bit. Well, why would they? At risk of horrifically simplifying things, I have a company, I decide I want some more money. I sell you the right to vote in some things that concern the company, and I sell you a share of any dividends that get paid out in the future. That's what you get. Do you now own the company? Do you own the company assets? I didn't sell that to you. I sold you the right to vote in some company meetings and decision making processes, and I sold you a piece of any future dividends that get paid out to you and others like you. Doesn't sound like "owning" something to me.
    - kgwgk 7y ago
      > I have a company What does that mean? You don’t “own” the company, do you?
      - EliRivers 7y ago
        Certainly not in the same way that I can own a pen or a nice wristwatch. Now we're getting somewhere! So what does it mean to "own" a company? If the company is just me and a bag of tools, fixing people's cars on their driveway, do I own that company? What does it even mean for me to "own" it?
        Gibbon1 7y ago
        You're making a good argument to point out that 'ownership' takes a lot of different forms. And an interest in one class of thing isn't the same as others. Ownership comes with differing, restrictions, rights, and responsibilities depending on the thing. An opinion of mine the ownership of a company through stocks is secondary to stocks being a quasi-cash financial instrument like bonds.

dorchadas 7y ago

Wasn't there that Michigan Supreme Court decision that states that was precisely the purpose of a company -- to maximize shareholder value?

EliRivers 7y ago
You're thinking of https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co. , which was literally a century ago. If you scroll down to "Significance", you can read for yourself that it's by no means universally accepted ("that this interpretation has not represented the law in most states for some time"). Let's come forwards a little; as the U.S. Supreme Court recently stated, "modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so." Where this is basically going is that the common belief - that there is some clear, absolute law that totally says the shareholders are the owners and the company is all about giving money to them - simply isn't true.
- dorchadas 7y ago
  Thank you! I just remember reading about it before, but didn't know much more. Thanks for the info, and definitely glad that's changed!

darawk 7y ago

It is true. The company is owned by its shareholders, collectively.

EliRivers 7y ago
Even if they did "own" the company (which they don't, unless you choose to define the terms identically - "owner" and "shareholder" are not synonymous), just owning a company doesn't mean all the earnings belong to you. Here's some legal people on the subject; https://www.lawschool.cornell.edu/academics/clarke_business_law_institute/corporations-and-society/Common-Misunderstandings-About-Corporations.cfm https://www.lawschool.cornell.edu/academics/clarke_business_... Key phrases include "shareholders do not own business corporations, nor do they own the assets of the corporate entities". Now, there are other opinions, but the very fact that this is an ongoing discussion suggests strongly that it is not as cut and dried as you claim.
- deleted 7y ago
  [deleted]
- darawk 7y ago
  They do, collectively, own most companies. It is possible to create shares that do not represent an ownership interest, but most companies are structured such that they do. Shareholders are generally able to reconstitute the board, which can appoint a CEO, who is in control over the assets of that company. They may then appoint a board, who would appoint a CEO who would liquidate the assets and return them as a dividend to the shareholders. That is the sense in which they own the company. Now, some companies sell shares that don't have voting rights (e.g. Google, Facebook). Those are a bit more nuanced. Though even in those cases, there are voting shares, they're just not traded in the public markets. So, the statement that the company is owned/controlled by its shareholders remains correct.