The Corporation and the Shareholder

Abstract

The incidents of a shareholder's interest and his relationship to the corporation depend upon the characteris tics of the corporation as well as the legal theory of such inter ests. The most common form of shareholding in this country is ownership of shares in a large corporation whose shares are widely held and actively traded, usually on a national exchange. In such companies, shares are so widely scattered that the tra ditional legal concept of control exercised by the shareholders becomes unworkable. Corporate management becomes virtu ally independent of any kind of internal control, raising ques tions of the proper definition of its legal and ethical responsi bilities and the means of their enforcement. Management responsibilities to shareholders should be defined with reference to shareholders' legitimate expectations, a reflection of goals of passive investors rather than those of co-owners in a business enterprise.