Page 16 ~ The standard view of a company could be called a “univalent” one: a linear descent from the board of directors through the managers and employees to the customer. This univalent view has as its corollary the belief that a company is “simply in business to make a profit.” This belief is one of the most fundamental in the credo underlying the free enterprise system and needs to be examined carefully.
In general, there is a misunderstanding about who owns the company. Most people believe that shareholders own the company. But do they in fact do so? Or do they own shares in a company? This is a very important question because on the way it is answered rests the understanding to control and to be responsible for. “Ownership-responsiblity-control” are interdependent. Do shareholders control a company, are they responsible for what it does? It might be said in so far as the shareholders elect the board of directors and the board of directors selects the president that the shareholder indeed is in control. But is this the best way to account for the facts? For example, J. K. Galbraith says that the annual meeting of the large business corporation is perhaps a most elaborate exercise in popular illusion because with great unction and little plausibility, corporate ceremony seeks to give the stockholder an impression of power. When the entrepreneur owned the company he shared this ownership with a few powerful shareholders, who ran the company with him. There was comparatively little pomp and ceremony. But as the stockholder gets less, more ceremony is required.
March 13th, 2020 ~