Chapter Content
Okay, so, like, have you ever stopped to think about what it *really* means to own something? I mean, we throw that word around all the time, "I own this," "I own that," but is it really that simple? There's this idea, pushed really hard by some economists, like, most famously, Milton Friedman, that a company's main goal is to make as much profit as possible for its shareholders. He basically said that managers are employees of the shareholders and should do exactly what the shareholders want.
But like, is that even true? Are shareholders really the owners of a company? And even if they are, should managers *only* think about them? It's a really interesting question. I mean, way back when railroads were getting huge, it was already clear that executives, you know, the people actually running the companies, had a lot of power. And that brings up the whole "principal-agent problem," which is, how do you make sure the people in charge, the agents, are doing what the people who supposedly own the thing, the principals, want them to do?
And, you know, different countries see this stuff differently. Places that follow what's called "common law," like the US and countries that used to be part of the British Empire, tend to rely on legal precedents, basically, past court decisions. But most other places, like, most of Europe and even China and Japan, they use "civil law," which is based on detailed written rules and codes.
So, are shareholders owners? Well, there was this court case a while ago, where the government took over an aircraft company. The shareholders got paid based on the stock price, but one of them sued, saying they should have gotten more based on the actual value of the company’s stuff, its assets, you know? But the court said, nope, shareholders aren't part-owners of the company. They just own the shares and got a fair price for them.
And that's kind of the thing, right? A company owns its own stuff. It's not holding it "in trust" for the shareholders. Any benefit to shareholders has to come from dividends, so payouts, or the value of their shares going up, not from, like, literally owning a piece of the factory floor. It’s all just a bit more complicated than that. Like, who really holds the shares these days anyway? It's usually some bank or broker, acting for a pension fund or something. So it is principal-agent all the way down!
It’s hard to really put your finger on what a share *is*, you know? It's a bunch of rights: the right to get dividends if they're paid out, the right to vote on some things, and the right to get a cut if the company gets liquidated. But some legal scholars have said, basically, that a company is both its own thing with its own rights and duties, and, at the same time, a thing *owned* by its shareholders. See? Confusing, right?
Germany, for example, has this law that says property ownership has to serve the public good. So, you can't just do whatever you want with your stuff. You’ve gotta think about how it affects everyone else. In the US, things are a bit more, well, shareholder-focused, I guess. But even there, the law says that directors, the people running the company, have a responsibility to act in the best interests of the company, which *sort of* implies they should think about more than just making shareholders rich.
There was this old court case where a shareholder sued because the directors were doing bad stuff with the company's money. But the court said, no, the company itself has to sue, not the shareholder. Only in super specific cases can the shareholder sue for damages to the company.
And then you get into stuff like Delaware, which is where, like, a *ton* of big companies are registered. It's basically because Delaware has laws that are really friendly to corporate executives. They passed laws saying that the executives aren’t personally liable for all that much, you know? It’s a race to the bottom to be friendly to big companies, and Delaware has been winning!
So, you can have things that are totally fine in Delaware but would never fly in other places, like in the UK. Stuff like "poison pills," which are designed to stop hostile takeovers, and "staggered boards," which make it harder for someone to take control of the company. Shareholders don't really have much say in things, either. They can't just put forward their own ideas or nominate directors, which is crazy!
There's been some federal laws trying to make things a bit fairer, but, for the most part, the people running the company, the executives, have a *lot* of power. So, even if shareholders are technically the owners, they can't really do much about it.
But what *is* ownership, anyway? Some economists have described it as the right to make decisions about something when there's no contract covering what to do in that situation. Like, you rent a car and want to install a CD player. If the contract doesn't say anything about that, you gotta ask the owner, right? But, even that doesn't quite cover it. When you rent a car, it’s you who gets the parking tickets! You are responsible if you run over a pedestrian!
Think about buying a car. You might think it's *your* car, but the bank or whoever financed it might actually hold the title until you've paid it off. And with apartments, you "buy" them, but you only own a certain part of the building, with different rules and responsibilities depending on where you live.
Ownership has a lot of different angles, for sure. It's not as simple as "I own this, so I can do whatever I want with it." This one legal theorist, Honoré, came up with this idea of "badges of ownership." Basically, he said that owning something is like having a bunch of different rights and responsibilities. He listed eleven of them. Things like the right to possess something, to use it, to manage it, to get any income it makes, and to sell it. But you also have to not use it in a way that hurts other people, and it can be taken away if you owe money. And you can give it away or leave it to someone in your will. So it’s not a binary yes/no of ownership, it is a cluster of rights.
So, using those "badges," let's look at something like Amazon. Do shareholders own Amazon? Well, they definitely own their shares. They can sell them, leave them in their will, whatever. But do they own *Amazon itself*?
They can't just walk into a warehouse and take something. They don't get to decide how the company is run. They're not responsible if Amazon does something bad. They don't get the money if Amazon sells off its assets. They just get dividends if the company decides to pay them, which Amazon hasn't done yet. So, using those tests, it's kind of hard to say that shareholders really *own* Amazon. They only meet a couple of the criteria!
And it gets even weirder when you think about those class-action lawsuits where shareholders sue the company they supposedly own. It is like, can I sue my umbrella if it doesn't keep me dry enough? That makes no sense, right?
So, if you were to ask a Martian, who'd never heard of any of this, who owns Amazon, they'd probably say it's the executives, the people running the place. Or maybe Jeff Bezos.
The truth is, no one really "owns" Amazon or Apple, any more than anyone "owns" the air we breathe. These things just *exist*, with a bunch of different rules and relationships around them. To call it ownership is misleading. The idea of "ownership" just doesn't really fit the way modern companies work. It gets in the way of understanding what's really going on. And like, that’s something to really think about.