Specifically, Cable’s loose reference to shareholders as the ‘owners’ of the company triggered heated responses from those who believe that a company should focus on more than the interests of its shareholders. Those agitated commentators consider it vital that for companies to be treated and described as separate legal entities, without owners. Effective corporate governance involves the consideration of a variety of stakeholders as well as shareholders and, accordingly, there is an argument that the conflation of share ownership with “ownership of the company” necessarily undermines this. The first version of the UK Corporate Governance Code produced in 1992 contained the classic definition of corporate governance to be “the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place. “The responsibilities of the board include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The board’s actions are subject to laws, regulations and the shareholders in general meeting.” The governance relationship is complex, being principally between the company, its managers and its shareholders which sit at the apex. However, one must also contend with a range of wider stakeholders, including, employees, customers and suppliers, regulators and the community. Companies are legal persons distinct from the shareholders: that is the whole purpose of the joint stock company and dates back hundreds of years. Shareholders in private companies limited by shares hold an intangible property interest as defined in the articles of association of the company. Save on a solvent liquidation, the shareholder does not have an underlying ownership right into the assets of the company. The answer to the question of who owns a company depends on what is meant by ‘owners’. Most people in the UK would consider shareholders to be the owners of the company (albeit not of the company’s assets). However, by their very nature quoted companies have a diverse shareholder base and it is very common for the largest shareholders in a major PLC to hold just a few percentage points of the entire issued capital. Companies are distinct from their shareholders, but not isolated from them.
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