Over at Truth on the Market, Elizabeth Nowicki offers up a post entitled Dear Wal-Mart, Shareholders *own* the corporation. In said post, she opines:
Today’s WSJ had an article titled “Wal-Mart Apologizes to Groups That Were Focus of Surveillance,” which noted that Wal-Mart apologized for responding to large institutional shareholders as “threats.” Obviously Wal-Mart realized a bit too late that it was absurd, from an investor relations standpoint (and a corporate governance standpoint), to refer to the owners of the corporation as “threats.”
I agree that Wal-Mart made a PR mistake here. Having said that, however, shareholders do not own the corporation. In a comment to Elizabeth's post, Thom Lambert invokes yours truly towards that end:
I realize that most folks think shareholders “own” the corporation because they have voting rights and are the residual claimants. People who view the corporation as a nexus of contracts, though, tend to dispute that notion. (What would it mean to “own” a collection of contracts among suppliers of capital, suppliers of managerial talent, etc.?) Prof. Bainbridge’s director primacy model, for example, asserts that “the corporation is a vehicle by which the board of directors hires various factors of production. Hence, the board of directors is not a mere agent of the shareholders, but rather is a sui generis body — a sort of Platonic guardian — serving as the nexus for the various contracts making up the corporation.” (See here.) Under that view, it would seem that trouble-making shareholders shouldn’t occupy any privileged position vis-a-vis the board.
I would direct those of you who are sort of interested in this question to my blog post Who Owns the Corporation?. If you're really interested in the issue, I direct your attention to my law review article The Board of Directors as Nexus of Contracts.
As for the question of whether shareholders can pose a "threat" to the company, see my post Unions as Shareholder Activists.
