Topics Business

Question This is a question about philosophy of economic theory and the concept of property. Supposedly when I buy a stock what I am doing us buying a share of a corporation. In other words I supposedly "own" a part of the corporation. I have several objections to that claim. I did not buy the stock so that I could have voting rights in that corporation nor did I buy it for the trivial dividends the stock supplies. Those things have no value to me or most investors, and with few exceptions no one buys a stock because they have a desire to have voting rights in that company. Certainly if you are going to own a part of something what you own is going to be what makes that thing valuable and profit is what makes a company valuable and thus to own a company is to own a share in it's profit and stocks don't really give you that. Is there some deeper and non-arbitrary sense of the term "ownership" that sophisticated economic theory relies or is "ownership" a loose term?

Accepted:
February 16, 2011

Comments

I don't find your objections compelling. The fact that you don't value something doesn't count against your owning it. For better or worse, your purchase of the stock gives you a say in the company's affairs and, no matter how little you may care about this entitlement, you still have it.

Second, by virtue of the stock you own, you're also entitled to a share of what you do care about: the company's profit. Many companies pay out part of their profits as dividends, and your stock entitles you to receive you fair share of all such dividends. If you own one millionth of the company, you get one millionth of any dividend distribution.

Finally, your interest in profit gives you reason to care also about voting rights. Those who run a company will do a much better job if they are supervised by vigilant owners and know that they may well be voted out or reduced in salary if they do poorly. Not all owners need to pay attention, of course, but if none do, the executives are likely to run the company for their own benefit -- and then there won't be much profit to distribute to the owners.