Please excuse this rather sensationalist title—I have just picked myself up from the floor having read this clause in the recital section of a [draft] directive being prepared in the EU:
"Although they do not own corporations, which are separate legal entities beyond their full control, shareholders play a relevant role in the governance of those corporations."
The proposed directive, which encourages long-term engagement and gives voice to shareholders in listed companies and large companies, seems to be well intentioned. However, the statement that shareholders do not own the corporation left me flabbergasted. It raises all sorts of questions:
  • If the shareholders (collectively) do not own the corporation, who does?
  • To whom is the board accountable—the shareholders (who don't own the asset the board is charged with operating); or, the [now unknown] owners; or, some other group?
  • Who benefits from the wealth created by the corporation, the shareholder, the owner or some other party?
Why anyone would buy an asset if they knew that a condition of purchase was that they did not own what they had just paid for is beyond me. Is this sloppy drafting, or have I missed something in the semantics? Can someone with a legal mind and expertise in this area please elucidate?