ARE SHAREHOLDERS REALLY THE ‘OWNERS’ OF A COMPANY TO JUSTIFY THE PRIMACY OF THEIR INTERESTS OVER EVERY OTHER INTEREST IN THE MANAGEMENT OF PUBLIC COMPANIES?

Abstract

Since the 19th century, the big public commercial companies have become the preferred choice of business for‘passive’ investors who want to invest their money in a corporate business enterprise without being personallyand actively involved in the management of the company and without the risk of losing their personal assets tocreditors in the event of the liquidation of the company. Under this period, the capital market became very welldeveloped resulting in the ability of public companies to raise money from the public with ease. Of course, thereis neither a statutory restriction on the number of membership of public companies nor on the transferability oftheir shares. Shares of these public companies could thus be easily bought and sold in the capital market by anyinterested investor. This has resulted to the emergence of gigantic public companies with very wide diverseshareholders who are mere investors without active participation in the management and the control of thecompany which are respectively left in the hands of hired experienced managers and in the hands of governmentand market forces of demand and supply. This takes public companies away from the region/realm of otherforms of business like sole trade, partnership and private companies where the owners are, most often, themanagers of the business. It is believed that it is the fusion of ownership and control in the olden-day companiesthat justified the shareholders/members of the company being regarded as the owners of the company and thusthe corporate objective prevalent at that time – which was that companies should be run chiefly for theshareholders’ economic well-being or wealth maximisation. As ownership and management or control of thesebig public companies are now separated, questions are beginning to be asked whether it is still proper for thebig companies to be run to advance solely or primarily the economic interests of the shareholders as againstthose of the other non-shareholding stakeholders. The researcher has decided to look into this issue. In doingso, doctrinal research method was adopted. The work observed that the era of big companies focusing solely onand prioritising the economic well-being of its shareholders is becoming a thing of the past as good, responsibleand stakeholder-friendly companies are now considering and inculcating the interests of the non-shareholdingconstituencies in their corporate policies and programmes and the traditional notion of seeing shareholders asthe owners of the company is thus currently withering/weathering.