The Anglo-American Misconception of Stockholders As ‘Owners’ and ‘Members’: Its Origins and Consequences

Journal of Institutional Economics, Forthcoming

40 Pages Posted: 23 Sep 2019

See all articles by David A Ciepley

David A Ciepley

Institute for Advanced Studies in Culture, The University of Virginia

Date Written: August 6, 2019

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 misdescription set the legal mold for all subsequent Anglo-American treatments of stockholders.

Keywords: member corporation, property corporation, Dutch East India Company, English East India Company, Levant Company, stockholder, owner, member

JEL Classification: B15, N73

Suggested Citation

Ciepley, David A, The Anglo-American Misconception of Stockholders As ‘Owners’ and ‘Members’: Its Origins and Consequences (August 6, 2019). Journal of Institutional Economics, Forthcoming , Available at SSRN: https://ssrn.com/abstract=3453563 or http://dx.doi.org/10.2139/ssrn.3453563

David A Ciepley (Contact Author)

Institute for Advanced Studies in Culture, The University of Virginia ( email )

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