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In this report I am going to discuss one new concept of Company which is whether a company is the property of its shareholders or not. Shareholders of a company have their specific rights which are ensured by law . First I will explain about what shareholders of a company are able to do and than about the ethics and social responsibility of the company which will help to come up with a decision for this argument.
History discovers that although some forms of companies are thought to have existed during Ancient Rome and Ancient Greece, the closest recognizable ancestors of the modern company did not appear until the second millennium. Early companies were purely economic ventures; it was only belatedly realized that an incidental benefit of holding joint stock was that the company's stock could not be seized for the debts of any individual member .
Previously company was thought as the property of its shareholders but now according to the new socio-economic thinking, is a social institute which has responsibilities towards society, not only it has responsibilities towards the workers but also towards the consumers and other members of the community .
2. PART A: DEFINITIONS AND PHILOSOPHERS’ VIEW
Lord Justice Lindley defines a company as follows: By a company is meant an association of many persons who contribute money or money’s worth to a common stock and employ it for a common purpose .
Companies are distinguished for legal and regulatory purposes between public companies and private companies . And public companies may be classified into three types; a) companies limited by shares, b) companies limited by guarantee and c) unlimited companies. There cannot be a private company with unlimited liability.
3. PART B: THE LEGAL STATUS OF SHAREHOLDER RIGHTS
A shareholder (or stockholder) is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. Companies listed at the stock market are expected to strive to enhance shareholder value .
Shareholders have right to vote (usually one vote per share owned) on matter such as election of Directors , Fundamental Transactions , Proxy Rules etc.; sell their share at any times to generate profit as well as the right to share in distributions of the company's income, the right to purchase new shares issued by the company, and the right to a company's assets during a liquidation of the company .
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"A Company is Not the Property of Its Shareholders." 123HelpMe.com. 05 Dec 2019
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But ownership of 51% of shares does result in 51% ownership of a company, it does not give the shareholder the right to use a company's building, equipment, materials, or other property. This is because the company is considered a legal person, thus it owns all its assets itself . Because here also comes the responsibility towards the society and business ethics and it will be discuss in the next part.
4. PART C: DISCUSSION
The conventional companies and company laws take individual principals (shareholders) as the starting point for consideration, believing that the highest or the sole objective of a company is to achieve profits in order to maximize the profits for shareholders. And each share represents a portion of the company's net assets that the shareholder owns . Thus, under this view, only those activities that increase profitability and shareholder value should be encouraged.
Other theorists contend that a business has moral duties that extend well beyond serving the interests of its owners or stockholders, and that these duties consist of more than simply obeying the law. They believe a business has moral responsibilities to so-called stakeholders, people who have an interest in the conduct of the business, which might include employees, customers, vendors, the local community, or even society as a whole .
At the same time, Shareholders do not make informative decisions. For example, say Dell had a shareholder meeting, when you are there, you might be ask to vote on something but honestly, you have no clue of the details. You end up voting based on what the executives tell you. The executives hold all the cards, not the shareholders .
So we can say, in addition to realizing the maximum profits for shareholders, companies should also strive to maintain and upgrade social benefits. Of the two corporate objectives of achieving maximum corporate profits and social benefits, any single one of the objectives will have to be put under restriction by the other. This CSR theory believes that companies have the obligation to satisfying shareholders’ interests rather than causing damages to other parties. By this theory, as long as companies have avoided causing or corrected the social harm caused due to their behavior during the process of business activities, the companies are deemed to have fulfilled their social responsibilities .
5. PART D: CONCLUSION
A shareholder is investing his money to a company to earn profit from it, so he has every right maximize profit. But now the idea has been changed as you can do whatever you want you can do with your money as you are the owner of your company but it is also true that you have responsibilities to the society and other who are involve to it.
But the question here is how far you can go to maximize your profit and the answer is unless you are not you doing any harm to the society you can do whatever you want to do. The idea of harm varies from place to place and time to time as well. For example, producing wine is harmful in a country like but not in USA and same you prostitution is not recognized to Islamic country.
So you have to balance between your profit maximizing trends as a owner of the company and responsibilities to your society by evaluating the environment of your society.
Article on “Taking Shareholder Rights Seriously”, by Julian Velasco, University of California, Davis [Vol. 41:605]
In England, see Edmunds v Brown Tillard (1668) 1 Lev 237 and Salmon v The Hamborough Co (1671) 1 Ch Cas 204. In England the first joint stock company was the East India Company, which received its charter in 1600. The Dutch East India Company received its charter in 1602, but is generally recognized as the first company in the world to issue joint stock. Not coincidentally, the two companies were competitors.
Commercial Law including company law and industrial law, by Arun Kumar Sen and Jitendra Kumar Mitra, 26th Edition, Page: 542
Commercial Law including company law and industrial law, by Arun Kumar Sen and Jitendra Kumar Mitra, 26th Edition, Page: 538
Commercial Law including company law and industrial law, by Arun Kumar Sen and Jitendra Kumar Mitra, 26th Edition, Page:544-545
Further Reading: Dignam, A and Lowry, J (2006) Company Law, Oxford University Press ISBN-13: 978-0-19-928936-3 and http://en.wikipedia.org/wiki/Shareholder_value; Jones v. H. F. Ahmanson & Co., 1 Cal. 3d) and JONES v. H. F. AHMANSON & CO. (1969) 1 C3d 93
See 2 MODEL BUS. CORP. ACT ANN. § 7.28 historical background n.2,at 7-189 (Supp. 2000-2002) (“following the publication of the Exposure Draft in 1983”); 2 R. FRANKLIN BALOTTI & JESSE A. INKELSTEIN, THE DELAWARE LAW OF CORPORATIONS & BUSINESS ORGANIZATIONS, at VII-28 to -28.1 (3d ed. 2007 Supp.) (noting Chapter 136, laws of 1987).
See, e.g., MODEL BUS. CORP. ACT § 10.03 (charter amendments); id. § 11.04 (2005) (merger). But see id. § 10.20(a) (2005) (noting bylaws may be amended by shareholders acting alone).
See H.R. REP. NO. 73-1383, at 13-14 (1934).
See Whitman, 2004, 5: ...it can safely be stated that there does not exist any publicly traded company where management works exclusively in the best interests of OPMI [Outside Passive Minority Investor] stockholders. Instead, there are both "communities of interest" and "conflicts of interest" between stockholders (principal) and management (agent). This conflict is referred to as the principal/agent problem. It would be naive to think that any management would forgo management compensation, and management entrenchment, just because some of these management privileges might be perceived as giving rise to a conflict of interest with OPMIs.
Essays on Ethics in Business and the Professions, Jack N. Behrman, Englewood Cliffs, NJ: Prentice Hall, 1988
http://en.wikipedia.org/wiki/Stakeholder_%28corporate%29 and Friedman, Milton. "The Social Responsibility of Business is to Increase Its Profits", The New York Times Magazine, September 13, 1970
Zhang Shi Yuan, Liu Li: “On CSR”, excerpt from “Classics of Chinese Commercial Law” (Volume 2002), Press of Machine-building Industry, 2002 edition.