by throw0101a | 2025-10-05 11:56:59+00:00
> Ok fine, companies have a duty to their shareholders to do as they are told, within relevant laws, which usually means maximising profits over some timeframe.

Nope. First of companies have no duties, as they are not sentient, and thus have no free will to follow order or not.

While the directors of the company often/generally follow shareholder direction, they are not legally bound to: the directors have a contract with the company and so they must do what they think is best for the company.

But if you think it is for "shareholders", then "which" shareholder? The pension fund that wants steady dividend payments for 3 decades? The hedge fund that wants a meteoric rise in share prices in 3 years? The day trader that's trying to cash in on a meme in 3 days? There is no (single) Platonic "shareholder" that a company's directors can aim to be best at: there are a variety of people holding stock. Do a search for "shareholder heterogeneity".

> These can even be clawed back, in certain situations, if the company then goes bankrupt - i.e. shareholders aren't just paid spectators, they bear responsibility for the business.

Using UK law and precedent (just because it was easiest to find quickly):

> Unlike the agency theory, corporate law does not grant shareholders the right to necessarily impose their will on the company. The case of Gramophone & Typewriter Ltd v Stanley [1908] stated that “even a resolution of a numerical majority at a general meeting of the company cannot impose its will upon the directors when the articles have confided to them the control of the company affairs. The directors are not servants to obey directions given by the shareholders as individual; they are not agents appointed by and bound to serve the shareholders as their principals”.

> Shareholders possess a piece of paper entitling them to receive future income, but do not have the right to use any of the assets held by the corporation for their personal use. Companies are legal persons and in that capacity, they can own assets and use them in accordance with the directions given by directors. If any shareholder were to attempt to possess the asset and use it for personal enjoyment, s/he will probably be accused of theft.

[…]

> Shareholders cannot use the assets of a company to satisfy their own debts. In common with other consumers, shareholders can use a company’s assets and services by paying a price, but they generally do not have any special privileges arising from their investment in shares of the company.

* https://www.pqmagazine.com/the-myth-of-shareholder-ownership...

If I own shares in AAPL, I cannot walk into the UFO HQ and start grabbing stuff because I do not own it: I'd be arrested for theft. Further, Tim Cook has a bunch of actual stock in AAPL, but if he tried transfer a bunch of money from AAPL's chequing account to his own account it would be theft/embezzlement: because as a shareholder he does not own it.

It is the corporation itself that has ownership of its own assets. And who owns the corporation? Well just like a natural person [1] ("human"), a legal person [2] ("business") owns itself.

[1] https://en.wikipedia.org/wiki/Natural_person

[2] https://en.wikipedia.org/wiki/Legal_person

Now a natural person can delegate the running of their assets (real estate, portfolio, etc) to other people (grounds keeper, CFP/CFA/CIPM), so can a legal person (President, CFO, etc). But the people hired have a responsibility to the person in question.

Shareholder do not even have the right to demand income/dividends: the directors hired by the corporation have to decide what to do with whatever assets are left over all liabilities are handled, with an eye towards what is best for the corporation.

Or Canadian law:

> In contrast to what you may have previously understood, ownership of a corporation’s share does not represent ownership of the corporation itself. Rather, it represents ownership of certain rights to the corporation, which are granted in consideration for an equity investment or past services. The three basic shareholder rights are: the right to vote, the right to receive dividends, and the right to the corporation’s remaining assets upon dissolution or winding-up.

* https://queenslawclinics.ca/node/81

> There is a basic tension inherent in the regulation of corporations between the role to be played by boards and that to be played by shareholders. Boards have the statutory responsibility to manage the business and affairs of the corporation, and owe an express duty to act in the best interests of the corporation. Shareholders, however, are the ultimate ‘owners’ of the corporation, and have the ability to elect and remove directors. […] For a number of reasons the Canadian regulatory regime has developed a shareholder-centric model, which tends to foster an emphasis on process and shareholder rights, and stands in sharp contrast to the American regime and its nuanced approach to director duties.

* https://digitalcommons.osgoode.yorku.ca/cgi/viewcontent.cgi?...

Not the quotation marks around the word owners. Also:

> Critically, both in British law and theory shareholders are not ‘owners’ of the company they have shares in, and lack many of the rights and powers typically derived from ownership. In 1948, the Court of Appeal ruled that “shareholders are not, in the eyes of the law, part owners of the company”. The House of Lords strongly reaffirmed that ruling in 2003, a judgement the EU’s recent Shareholder Directive echoed. Ownership of capital – in this case, owning shares – is therefore legally and theoretically not the same as ownership of the company.

* https://www.ippr.org/articles/who-owns-a-company

> Corporate reality, though, has proved stubbornly uncooperative. In legal terms, shareholders don’t own the corporation (they own securities that give them a less-than-well-defined claim on its earnings). In law and practice, they don’t have final say over most big corporate decisions (boards of directors do). And although many top managers pledge fealty to shareholders, their actions and their pay packages often bespeak other loyalties.

* https://hbr.org/2012/07/what-good-are-shareholders

* (2) Although they do not own corporations, which are separate legal entities beyond their full control, shareholders play a relevant role in the governance of those corporations. The financial crisis has revealed that shareholders in many cases supported managers' excessive short-term risk taking. Moreover, the current level of “monitoring” and engagement in investee companies by institutional investors and asset managers is often inadequate and too much focused on short-term returns, which leads to suboptimal corporate governance and performance of listed companies.*

* https://www.europarl.europa.eu/doceo/document/TA-8-2015-0257...

* https://blogs.law.ox.ac.uk/business-law-blog/blog/2016/11/mo...

(The post is long because I want a single place for all the references I've managed to find on the subject given how often this idea comes up and has to be debunked.)