They are economic entities. Not people. They do not own themselves otherwise a majority shareholder couldn't control them.

They are economic entities. Not people. They do not own themselves otherwise a majority shareholder couldn't control them. — Cheshire

They are legal persons, not real persons. And they do own themselves, legally. That’s not the same thing as running itself, which is done by real humans. Mostly the board of directors and CEO.

They are legal persons, not real persons. And they do own themselves, legally. That’s not the same thing as running itself, which is done by real humans. Mostly the board of directors and CEO. — Xtrix

They are legal entities; that is not a person. The board is elected by the shareholders dumbass....aka the owners of the company.

They are legal entities; that is not a person. — Cheshire

I’ll repeat: corporations are legal persons, not real people.

https://en.m.wikipedia.org/wiki/Legal_person

Look no further than Citizens United to get a clear view of what the Supreme Court thinks of it as well.

The board is elected by the shareholders dumbass — Cheshire

That has nothing to do with ownership, dumbass.

aka the owners of the company. — Cheshire

The shareholders are not the owners of corporations. Neither are the board of directors, who run the company. The board of directors, although elected by shareholders, have no legal obligation to do what the shareholders want, and often don’t. There are plenty of court cases about this as well.

What they can’t do is steal from the company. That’s illegal.

The shareholders are not the owners of corporations. Neither are the board of directors, who run the company. The board of directors, although elected by shareholders, have no legal obligation to do what the shareholders want, and often don’t. There are plenty of court cases about this as well. — Xtrix

Fascinating. Now, tell me how they are different than worker-owners?

The shareholders are not the owners of corporations. Neither are the board of directors, who run the company. The board of directors, although elected by shareholders, have no legal obligation to do what the shareholders want, and often don’t. There are plenty of court cases about this as well.
— Xtrix

Fascinating. Now, tell me how they are different than worker-owners? — Cheshire

Well compare Microsoft to Mondragon, for example. Both corporations. One (it's claimed) is owned by shareholders, the other (also claimed) by workers.

What does it look like in reality? The major difference is that the board of directors in the former are elected by shareholders -- more shares, more votes, and so the major shareholders (usually other large corporations, asset managers, occasionally very wealthy individuals, etc) vote in the directors (technically, although in reality the directors basically elect themselves due to almost never being voted against). In the latter case, the workers are their own board of directors.

It's the board of directors where the major decisions get made about the allocation of resources, the distribution of profits, whether to hire or fire a CEO, whether to give to charities, etc. But that's simply not the same as "ownership." You can't own a legal person. You can certainly control it, run it, manage it -- and that's what really matters anyway.

The shareholder primacy theory is an old one, and for the last 40 or so years has dominated academia (where it came from), journalism, the business world, and popular culture. But it has no basis in law, and has been a complete failure economically -- for investors (shareholders), for corporations themselves, for employees, for the community, and for the environment.

There's plenty of references, if you like.

Well compare Microsoft to Mondragon, for example. Both corporations. One (it's claimed) is owned by shareholders, the other (also claimed) by workers. — Xtrix

Oh, so the meaning of ownership changes when your position changes. All of a sudden that legal sense in regards to legal liability and direction of assets is a hologram. Which is it? Is a corporation owned or not by actual people.

Oh, so the meaning of ownership changes when your position changes. — Cheshire

No.

All of a sudden that legal sense in regards to legal liability and direction of assets is a hologram. — Cheshire

No. Shareholders being the owners of a corporation is a hologram.

Which is it? Is a corporation owned or not by actual people. — Cheshire

A corporation is not owned by anyone; a corporation, by law, as a legal person, owns itself. Persons, legal or otherwise, cannot be owned -- at least since we got rid of slavery.

A corporation is not owned by anyone; a corporation, by law, as a legal person, owns itself. Persons, legal or otherwise, cannot be owned -- at least since we got rid of slavery. — Xtrix

Oh, so the meaning of ownership changes when your position changes.
— Cheshire

No. — Xtrix

Good, so a worker-owner is a nonsense term by your own reasoning.

Are you just an idiot? Apparently. Mondragon is OWNED BY THE WORKERS. That's a "lie"? Then why repeat the lie: — Xtrix

About wraps that one up.

Interesting this company of yours managed to tie the manager salary to the min. wage. So, the definition of career success there is basically leaving as a manager for a better paid position or hoping to hit a ceiling and grind against it for 30yrs. It's not a good idea to limit your ability to hire the people that direct the most assets.

The shareholders are not the owners of corporations. — Xtrix

This doesn't make sense. I assume you mean here that the shareholders aren't in charge of corporations.

The board of directors, although elected by shareholders, have no legal obligation to do what the shareholders want, and often don’t. — Xtrix

The ordinary argument goes that as the shareholders elect the board of directors, they have the ultimate power. This is perhaps what you call "The shareholder primacy theory" or am I mistaken?

A corporation is not owned by anyone; a corporation, by law, as a legal person, owns itself. Persons, legal or otherwise, cannot be owned -- at least since we got rid of slavery. — Xtrix

I think I understand your argument.

But notice what you can do to a legal person: you can disband it. Or you can sell it and then it simply disappears from being a legal person like it had been, but a part of likely another corporation. That cannot happen with ordinary persons (since you got rid of slavery).

Good, so a worker-owner is a nonsense term by your own reasoning. — Cheshire

Not nonsense, just legally wrong. But it's true, I do use it to refer to workers (rather than shareholders) being the "owners" of the company, because that's the conventional view and common language. But yes, legally speak it's not correct.

The shareholders are not the owners of corporations.
— Xtrix
This doesn't make sense. I assume you mean here that the shareholders aren't in charge of corporations. — ssu

I know, it's a weird one. I had difficulty with it at first, but this isn't my own theory -- I'm basing this on legal scholarship. The late Lynn Stout of Cornell has good work on this. Here's Richard Booth:

https://scholarship.kentlaw.iit.edu/cgi/viewcontent.cgi?article=3350&context=cklawreview

Yes, the shareholders aren't legally in charge of the company. They are also not the legal owners. To make it easier to talk about, we speak about "share of ownership" and things like that, but it's legally erroneous. I myself didn't realize how prevalent this mistake is, in fact.

The ordinary argument goes that as the shareholders elect the board of directors, they have the ultimate power. This is perhaps what you call "The shareholder primacy theory" or am I mistaken? — ssu

You're exactly right. It's absolutely dominant -- which is partly why this is so hard to talk about.

Here again I'm talking about legality, not what happens in practice. You would certainly think that, because shareholders have the power to vote in board members, that they just vote in people who share their views, and vote themselves in -- and that's true. But it's also more complicated than that, because rarely is one person or company the controlling shareholder.

I think the reason boards actually DO act in accord with what shareholders supposedly want is precisely because of the shareholder primacy doctrine. It's on par with a system of belief -- one that's become entrenched in boardrooms and the business world generally.

Here's Stout, who explains it better: https://www.youtube.com/watch?v=k1jdJFrG6NY

Not nonsense, just legally wrong. But it's true, I do use it to refer to workers (rather than shareholders) being the "owners" of the company, because that's the conventional view and common language. But yes, legally speak it's not correct. — Xtrix

Always happy to disagree with an honest person. Cheers.

Here again I'm talking about legality, not what happens in practice. — Xtrix

Ok, your response above was good and I got it. We avoided here stupid misunderstandings and bickering. (We will leave that to the future issues and topics :wink: )

I have to look the links you gave. An interesting topic.

You would certainly think that, because shareholders have the power to vote in board members, that they just vote in people who share their views, and vote themselves in -- and that's true. But it's also more complicated than that, because rarely is one person or company the controlling shareholder. — Xtrix

Well, just add the fact that a huge chunk of those shareholders are institutional investors: mutual funds, hedge funds, pension funds, insurance companies, sovereign wealth funds. Snd naturally other corporations. This makes it totally different to lets say that you have the board of Microsoft and there as a representative of the shareholders is Bill Gates as a representative of the shares he owns.

When companies are founded from scratch, they have a link to certain human beings: the founders. And in a new sector these are the innovators who know basically all the technology and are quite apt in all of the fields. Allan Lockheed, William E. Boeing and all founders of aircraft companies were aviators themselves basically (even if there can be the odd exception). Bill Gates and Steve Jobs could use their hands to build computers. Yet once when the corporation grows and the pioneer generation retires, then it's likely that the CEO and board members aren't at all so invested at the field where the corporation competes that they would have similar abilities. They basically are recruited from a managerial class. This transforms the corporation from being lead by founders to a high paid caste of professional leader-employees taking over the corporation. The corporations becomes dis-attached from humans as owners. Large family owned corporations are rare, even if there are those still.

Ok, your response above was good and I got it. We avoided here stupid misunderstandings and bickering. (We will leave that to the future issues and topics :wink: ) — ssu

Appreciate the kind comments. Caught me on an off day— I’m sure I’ll be back to being an asshole soon enough.

This transforms the corporation from being lead by founders to a high paid caste of professional leader-employees taking over the corporation. The corporations becomes dis-attached from humans as owners. Large family owned corporations are rare, even if there are those still. — ssu

Right, and even private corporations are fairly rare.

Once a company goes public, it’s not as if every decision changes with the aim of maximizing stock prices and dividends. The Microsoft and Apple examples are good ones — who knows how they look in 15 years or so?

Apple actually is a perfect example. If you recall, Jobs got fired and then went on to create other companies. And then got back to Apple.

The story of Apple being in trouble and then a fixer Gil Amelio as a " as a corporate rehabilitator" coming on and doing the usual layoffs and cost-cutting is telling. As if the most important thing if your losing to your competitors is to lay off people and cut costs. Luckily Jobs came back and actually saved Apple from the Amelio types and now we do have the current Apple. What the managerial-class usually lacks to understand is how the whole sector can change, that for example growth in computers and software can transform into something totally new which wasn't obvious few decades ago. The pioneers typically have a great understanding about both the little aspects and how the small detail effect the outcome and what the larger picture is and they can see where things are going. The professional managerial class cannot, has been taught in business schools that there's an "computer industry" or "aircraft industry" and treat them basically the same.

And the fact is that a committee made up career committee members simply isn't as great in innovation as genuine innovators are. The committee meetings can be done with efficiency, but that isn't what is needed when a business ought to innovate and apply new thinking.

Another very typical issue is the hostile-takeover scheme: that someone takes a huge loan and buys the stock of a corporation, then as the corporation is obviously extremely in debt due to this, sells part or all of it off to make a profit. It should be obvious that such rip-off schemes aren't good usually for either the company or the sector. Yet all this is whimsically marketed as "streamlining" and "cutting costs". And, of course, the labor unions are blamed for the "inefficiency" and losses that basically happen because of the huge debt. The absurd rhetoric is somehow accepted and many view corporate raiders as somehow having a positive effect on the private sector, something good for capitalism.

(5) Where do the profits mostly go, in today's typical fortune 500 company?

(a) Infrastructure (factories, buildings, equipment)
(b) Workers wages, benefits
(c) Expanding the workforce (hiring)
(d) Dividends
(e) Stock buybacks
(f) Paying taxes
(g) Advertising
(h) Lobbying
(i) Research and development (creating new products) — Xtrix

I meant to put numbers on the answer:

Percent of earnings (2007-2016)

55% stock buybacks
39% dividends
6% everything else

https://www.brookings.edu/wp-content/uploads/2016/06/lazonick.pdf

(5) Where do the profits mostly go, in today's typical fortune 500 company? — Xtrix

Profits are what's left over after all the operational expenses and taxes. It wouldn't make sense to say a companies profits go to wages, because those aren't profits by definition. In fact, all profits go to dividends or retained earnings or a reduction in retained earnings from treasury stock transactions. Once again there is something the matter; but framing it in a way that tries to hide bias is only discrediting. I'm not going on at length about this one. So, disagree, you know the song and dance to an empty house.

It wouldn't make sense to say a companies profits go to wages, because those aren't profits by definition. — Cheshire

True, wages aren’t profits. When I said that I was thinking it would be clear I meant a raise in wages— i.e., giving the workers more— but fair enough.

In fact, all profits go to dividends or retained earnings or a reduction in retained earnings from treasury stock transactions. — Cheshire

No. Profits can be reinvested in the company by building new factories, buying more equipment, renovation, research, etc. They can also go to increasing worker salaries, to dividends, or to stock buybacks.

The answer is: stock buybacks. That’s where the profits are going. 94% go to this or dividends. Doesn’t leave much for the peon workers. At least since the 80s, thanks to Reagan’s administration— operating on the assumptions proposed by Milton Friedman.

No. Profits can be reinvested in the company by building new factories, buying more equipment, renovation, research, etc. They can also go to increasing worker salaries, to dividends, or to stock buybacks. — Xtrix

Yeah, the actual cash flow can be traced from the previous year into a budget. The issue is there it's just not well represented by the percent of profits table. The problem is labor market friction. The economic force that pushes up workers salaries isn't the benevolence of the human resources department. If the HR manager jacked up everyone's paycheck they would be fired. You are right about the fact a problem exist, but what's needed is an innovative solution that functions with the rest of the economic forces in play. Universal income that we saw with the COVID unemployment proves that given the option people will hold out for what they see is fair or better than fair market value for their labor.

The solution you are offering is an old one. Basically, force companies into being their own labor union or something of the sort. But, when it works it even fails. Unions operate largely on seniority and rules instead of responding to innovative performance. The power dynamic is artificially shifted and still loses the most important aspect of the goal. Which I would argue is the ability for a worker to maximize income based on performance. In order to achieve that in todays jaded world workers need the freedom to leave for better or equal pay without needing to risk their own stability in the process. Some how quantize labor inputs and create a flawless information system and methodology for allowing the changing of jobs at will. It is a system that maintains the dynamics of supply and demand, but neutralizes the disparity in company versus employee negotiating power. Then, charge companies to use it and make yourself a billionaire.

You are right about the fact a problem exist, but what's needed is an innovative solution that functions with the rest of the economic forces in play. — Cheshire

Yes, of course. Just like what happens now. But those solutions aren’t working— which is why you mentioned “innovative”, I’m sure, and with which I agree. I think we need innovative solutions too. I’m trying to promote some of those solutions (again, not my own).

To be concrete: if wages at a company are low (compared to comparable work elsewhere), this puts them at a disadvantage— they’re more likely to have higher turnover rates, worse morale, lack of applicants, reputational damage (especially true these days where you can research a company online before applying, including worker reviews), etc. On the other hand, there are budgetary constraints — pay the workers too much, and the company may get squeezed or even put into debt, given that profit margins aren’t always the same.

It’s a complex situation, no doubt. The problem, according to research I cited by Lazonick and others, is that these decisions are being made on the basis of shareholder primacy theory. That is:

(1) under the idea that the shareholder is the owner (or partial owner) of the company (which we talked about, but let’s assume that’s true);

(2) thus the responsibility of the board of directors is to prioritize the shareholders’ aims;

(3) and that what shareholders want is to make a profit.

Therefore the responsibility of the company is to make a profit for shareholders. As you know, this was basically Friedman’s title of his famous 1970 article.

I agree with Lazonick that this is a problem. We’re seeing record profits and stagnating wages because most of the profits have been spent on buybacks and dividends— and why? Not because businessmen are evil and don’t care about their employees or community, but because this theory tells them this is what one's duties are.

More importantly, they mistake this theory for the law, and this is a myth. There’s no legal basis for shareholder primacy.

So in the end, it’s a matter of a “bad religion,” so to speak, and one that isn’t working for anybody, except for a handful of people in the short term — as can be seen when this "neoliberal era" (roughly 1980-today) is compared against the era from 1949-1979. It's a matter of ideology, which is why I've argued elsewhere (in "The State, Church, Corporation" thread) that the real power isn't necessarily in Washington or Wall Street, but in the Church of Neoliberal Capitalism.

The solution you are offering is an old one. Basically, force companies into being their own labor union or something of the sort. — Cheshire

No no. I don’t want to do anything of the kind. It’s true I value labor unions, but I don’t want to force anything. I’d like removing, in fact, some laws and regulations that are anti-union and anti-worker. But this isn't about coming in with guns and forcibly taking things over -- at least not in my thinking.

Fundamentally I want the business world to continue being capitalist if they want to, but to change the ideology back to managerialism and away from shareholder primacy, strengthen good unions, and open the space for more cooperatives. I think this is the most realistic option we have. The ultimate goal in the long term would be to dismantle illegitimate power structures altogether -- but that can't and won't happen overnight, or even in a few generations.

The era of managerialism saw the highest growth rates, and worker wages keeping up with productivity. Also has much higher union membership. This was before the financialization of the economy happened and big banks doubled in size. There’s no reason we can’t get back to that era.

In relation to the Original Post: I think we can add one more question - "What conceptions of wealth drive today's economic activity--big businesses, small businesses, and other forms of value-generating work/labor?"

I say this because the ongoing pandemic has brought questions such as redistribution of wealth, and nationalization of healthcare, education, and sanitation into greater focus. The latter, however, may not be the answer, even if it is well-intentioned, but it does highlight the fact that governments simply need to improve healthcare, sanitation, and education spending. How do we do that effectively, and how can the debates surrounding redistribution be channeled to that end?

Today, there is also the tendency to regard nationalization and privatization of industries and services as efforts aimed at redistribution. This is not so at all. An industry can be privatized or nationalized without entailing redistribution. The processes don't necessarily imply each other. In particular, the proliferation of IMF-driven neoliberal economic policies has engendered the privatization of several essential industries and services across countries, and this is often done in the name of economic growth (as one can notice, itself a dubious concept nowadays; claims about promoting economic growth also tend to to be tautological). Nonetheless, it is also presented as an inclusive economics and policy approach. In reality, however, the policies mostly embrace the trickle-down approach, which is neither all that inclusive or a redistribution effort for that matter. It mostly only results in concentration of wealth.

"What conceptions of wealth drive today's economic activity — James Laughlin

A good question, yes. Related to the structure of a corporation, indirectly.

I'd argue the predominant conception of "wealth" is one based in material accumulation -- in this case, the accumulation of capital. That's seen as wealth, and wealth is a means to power.

Today, there is also the tendency to regard nationalization and privatization of industries and services as efforts aimed at redistribution. This is not so at all. — James Laughlin

It mostly only results in concentration of wealth. — James Laughlin

Which is redistribution, and which is what we see. The policies of neoliberalism -- small government, deregulation, privatization, etc. -- have lead to a massive redistribution from more egalitarian (50s, 60s) to extreme inequality. RAND corporation published a study on the numbers, and it's in the tens of trillions.

It never occurred to me that one could think of concentration as a form of redistribution, but just not egalitarian. Thanks for that. I have to agree with your argument about neoliberalism entailing redistribution in the form of concentration.