A Company Is the Property of the Shareholders Is an Exploded Myth

What is a company:

Generally, a company is a form of business organization. The actual definition varies from country to country and from academician to academician. Some of the definitions are:

• In the United States, a company is "a corporation—or, an association, partnership, or union—that carries on a commercial or industrial enterprise."

• In English law, and therefore in the Commonwealth realms, a company is a form of body corporate or corporation, generally registered under the Companies Acts or similar legislation. It does not include a partnership or any other unincorporated group of persons.

According to one source, "it may be formed by Act of Parliament, by Royal Charter, or by registration under company law (referred to as a limited liability or joint-stock company).

In Bangladesh a company is formed and run according to the �Company Act 1994.’

The main forms of companies are:

1. company limited by shares

2. limited-liability company

3. company limited by guarantee

4. company limited by guarantee with a share capital

5. Unlimited liability company.

Who is a Shareholder:

A shareholder or stockholder is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. A company's shareholders collectively own that company. Thus, such companies strive to enhance shareholder value and to maximize shareholders wealth.Shareholders are owners of the company. They have the right to vote and have a share of the profit.

A company is the property of the shareholders is an exploded myth:

The shareholder is the owner of the company. Previously, according to this theory it was held that the company was the property of the shareholder. If a person owns a piece of land, then the land is considered to be that person’s property. Similarly, on paper the shareholders are the owners of the company so it was considered that legally the company was the shareholder’s property.

Now there is a new Concept of Company. The question as to whether a company is the property of the shareholder has led to a lot of debate. Nowadays, modern academicians and philosophers have taken a different view. According to them the company is not the shareholder’s property. In the case, National Textile Workers’ Union v. P.R.Ramakrishnan the views of the Supreme Court are quoted below:

Now the theory that the company is not the shareholders property is accepted in all countries . According to the new socioeconomic thinking a company is a social institution that has certain duties and responsibilities towards the community. Not only profit maximization but social welfare maximization should also be one their main objectives. They view the shareholders as only the suppliers of the capital and not the proprietors of the company. The voice of the laisser-faire till 1990s was that profit maximization was the only goal of the company, shareholders and the management. But now they have modified this concept, and now they believe that the “profit at all cost” is not the way to go. But instead the company has to think about the stakeholders as well as the shareholders. Meaning, the company is not only responsible to the shareholders but also to the employees, consumers, the other members of the society and also the physical environment. As it will help them gain the attention and retain their customers in the long run. As nowadays consumers prefer to buy products of companies who perform their social responsibilities (shown in the diagram next page).The company also has a duty to lookout for the welfare of the country; implying that should be guided by the considerations of the national economy and its progress.

What is Corporate Social Responsibility:

Corporate Social Responsibility (CSR) is a concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and the environment in all aspects of their operations. Sometimes it is also referred to as business ethics , there is an overlap between CSR and business ethics. It is said to be an obligation , beyond that required be the law and economics, for a firm to pursue long term goals that are good for society. It sees the organizations voluntarily taking further steps to improve the quality of life