Josh Fersee continues the discussion of whether shareholder own the corporation with this observation:
I view shareholders as having “an ownership interest” in the corporation, an interest that is, I admit, often quite limited. I think comparing shareholders to those who own homes (or condos) with a restrictive homeowners’ association (HOA) as an apt analogy. When owning a home governed by an HOA, the homeowner gives up a number of rights often attributed to ownership — such as limits on exterior modifications or choice of color. However, just because those rights (and the related decision-making ability) were ceded to the HOA board, we don’t tend to think that means there is a lack of ownership.
Well, yes, but. A home is a thing. It is capable of being owned. But when we speak of the corporation, what is the res; i.e., the thing capable of being owned? I contend that there is no such thing:
In order for shareholders to own the corporation, the corporation would have to be a thing capable of being owned. It is not. The corporation is just a legal fiction, albeit a highly useful one, for the nexus of explicit and implicit contracts between a wide array of stakeholders, of whom shareholders are but one among many. [FN8] Employees provide labor. Creditors provide debt capital. Shareholders initially provide equity capital and subsequently bear the risk of losses and monitor the performance of management. Management monitors the performance of employees and coordinates the activities of all the firm's inputs. The corporation is a legal fiction representing the complex set of contractual relationships between these inputs.
[To be sure,] traditionalists reify the corporation: They treat the firm as an entity separate from its various constituents. Nexus of contracts theory rejects this basic proposition. Because shareholders are simply one of the many stakeholders bound together by this web of voluntary agreements, ownership is not a meaningful concept in contractarian theory. Someone owns each input, but no one owns the totality. Instead, the corporation is an aggregation of people bound together by a complex web of contractual relationships. (The validity of this insight becomes apparent when one recognizes that buying a few shares of IBM stock does not entitle me to trespass on IBM's property--I do not own the land or even have any ownership-like right to enter.)
