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The Anglo-American misconception of stockholders as ‘owners’ and ‘members’: its origins and consequences

Published online by Cambridge University Press:  07 October 2019

David Ciepley Open the ORCID record for David Ciepley [Opens in a new window]
David Ciepley*
Affiliation:
Associate Fellow, Institute for Advanced Studies in Culture, University of Virginia, Virginia, USA; Berggruen Fellow, Center for Advanced Studies in the Behavioral Sciences, Stanford University, California, USA
*
*Corresponding author. Email: [email protected]
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Abstract

That stockholders “own” the corporation and are its “members,” are assumptions deeply embedded in Anglo-American treatments of the business corporation. They are also principal supports of the policy of “shareholder primacy” and, in the United States, of the corporate claim to constitutional rights. This article critiques these assumptions, while also explaining why they took hold. Among several reasons for this, the primary explanation is to be found in the peculiar parentage of England's first major business corporation, the English East India Company (EIC). The EIC did not begin its life as a true business corporation, but as a cross between a guild (a form of member corporation) and a joint stock company (a form of partnership). In the transition to a unified business corporation, its stockholders inherited the monikers of “member” and “owner” from their guild and partner forebears. This mis-description set the legal mold for all subsequent Anglo-American treatments of stockholders.

Keywords

Corporationmember corporationproperty corporationEast India Companystockholdershareholdershareholder primacycorporate constitutional rights
Type
Symposium on Corporations
Information
Journal of Institutional Economics , Volume 16 , Issue 5 , October 2020 , pp. 623 - 642
Copyright
Copyright © Millennium Economics Ltd 2019

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