“Shareholders do not own companies, nor do they own the assets of companies”

Six academics,  from law schools and business schools in the US, UK, and continental Europe, have written a first class letter to the Financial Times today, printed under the headline “Acknowledge that companies remains separate legal entities”.

They take the Business Secretary to task for slipping into the trap of asserting, in the course of the controversy over bankers’ pay, that shareholders “own” banks.

Kent Greenfield and his colleagues write:

“….the notion that shareholders own companies is simply incorrect.

Shareholders do not own companies, nor do they own the assets of companies.

Shareholders own shares of stock – bundles of intangible rights, most particularly the rights to receive dividends and to vote on limited issues. 

Unfortunately the erroneous notion….that shareholders own companies seems to have side tracked the discussion, and policy formation, around corporate governance leading to an inappropriate and ultimately counterproductive focus on shareholders. 

…..companies are separate legal entities, without owners, and effective corporate governance involves the consideration of a variety of parties not, necessarily, shareholders.”

Signatories to the letter:  Kent Greenfield (Boston College Law School); Andrew Johnston (University of Sheffield); Jean-Philippe Robé (Sciences Po Law School, Paris); Beate Sjåfjell (University of Oslo); Andre Spicer (Cass Business School); Hugh Willmott (Cardiff Business School)