‘Ownership, Limited’ by Prof. Ronald Colombo

Professor Ronald J. Colombo has published “Ownership, Limited: Reconciling Traditional and Progressive Corporate Law via an Aristotelian Understanding of Ownership,” 34 J. Corp. Law 247 (2008).

Concern over issues of corporate social responsibility and corporate governance persists, fueled, in large part, by recent (and ongoing) corporate scandals of one sort or another. The debate over the nature of the corporation – and, consequently, the proper role of directors, shareholders, and other stakeholders – plays an important role in the consideration of such concerns. If one conceptualizes the corporation as an entity owned by the shareholders, then one would probably be more likely to view directors as mere agents, tasked with maximizing the wealth of their principals (the shareholders). On the other hand, rejecting such a conceptualization generally facilitates arguments in favor of demanding that directors also take into account nonshareholder constituency interests as well. This Article offers a compromise solution that builds a bridge between the traditional conceptualization of the corporation (as shareholder owned) and arguments in favor of greater directorial concern for nonshareholder interests. The compromise is premised upon an Aristotelian understanding of ownership, pursuant to which an owner is obliged to take the common good into account in the use of his or her property. By applying this Aristotelian understanding, one can embrace a more robust consideration of nonshareholder interests in the boardroom without having to reject the traditional conceptualization of the corporation as a shareholder-owned entity. The Aristotelian approach is justified because it more accurately captures human nature (than does a strict wealth-maximization norm) and, moreover, it arguably better reflects the historical understanding of the role of the corporation in society. Due to Aristotelian concerns regarding to the development of virtue, and due to economic concerns concerning the potential flight of capital from equity markets, the policy proposals drawn from the Aristotelian understanding are enabling rather than mandatory in nature – that is, they empower, rather than compel, shareholders and directors to take moral and ethical concerns into account.

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