v8n7: Strudler on von Kriegstein on Ownership and Shareholder Primacy
Posted: September 1, 2020 Filed under: Uncategorized 1 Comment
The Unowned Corporation, by Alan Strudler
A RESPONSE TO Hasko von Kriegstein (2020), “Shareholder Ownership is Irrelevant for Shareholder Primacy”, Bus Ethics J Rev 8(4): 20–26, https://doi.org/10.12747/bejr2020.08.04
Abstract:
In this response to Hasko von Kriegstein, I defend several claims, including that the publicly-traded corporation and its assets are unowned; that managers may stand in fiduciary relations to shareholders that do not require managers to maximize shareholder wealth; and that the rights of a shareholder and of the owner of a privately-held corporation may differ fundamentally.
To download the full PDF, click here: Strudler Responds to von Kriegstein on Ownership and Shareholder Primacy
Alan Strudler is Professor of Legal Studies and Business Ethics and Professor of Philosophy at the University of Pennsylvania.
Business Ethics Journal Review 
As is often the case when two academics disagree, Strudler and I each think we are being misunderstood by the other. Let me try to clear a few things up.
1. Strudler says that he is not committed to the conditional “if shareholders own the firm, shareholder primacy is vindicated”. I also think that this conditional is false.
a. I do not think that being the owner of a corporation entitles one to maximal profits.
b. Nor do I think that such a right would be entailed by the fact that managers are fiduciaries for owners of shares or for owners of the corporation.
2. Thus, Strudler’s characterization of my argument at the beginning of section 2 is not what I intended.
3. Instead what I argued was this: the important question is what the fiduciary relationship between managers and shareholders requires. And in answering that question, I don’t see why it would matter whether we think of the shareholders as owners of the firm or not.
a. Suppose I’m the sole owner of a business and hire somebody to run it on my behalf. I don’t think that person owes me maximal profits. Rather, they owe me a reasonable rate of return (very much like the lawyer in Strudler’s example). I think the same is true for the relationship between shareholders and managers (I agree with Strudler on that count).
4. The reason I thought Strudler was committed to the conditional in 1 is this: accepting the conditional would explain why Strudler spends so much time arguing that shareholders don’t own the corporation. Strudler’s aim overall is to argue against shareholder primacy. If you don’t think shareholder primacy is entailed by shareholder ownership, why do you care so much about the latter?
5. In responding to me, Strudler provides an answer to the question just posed: he thinks that non-ownership entails the falsity of shareholder primacy, while ownership is merely compatible with it.
6. Unfortunately, I cannot find an argument for that supposed entailment.
7. Strudler spends a fair amount of time showing that it’s possible that the owner of a firm is entitled to something other than the owner of shares in a firm. I fully agree with this claim.
a. I don’t think that there couldn’t be a difference between what the owner of a company is owed and what the owner of shares is owed.
8. I happen to think there is in fact no such difference (I think shareholder primacy is false on either picture).
9. What I didn’t see in Strudler’s original article, or in his response to me, is an argument to the effect that the difference does in fact matter.
10. Thus, it seems to me that Strudler’s original article is somewhat disjointed. It argues that shareholders don’t own the corporation. And it also argues that shareholder primacy is false. I didn’t see how the first claim (that I’m agnostic about) is supposed to support the second (that I think is true). I still don’t.