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Debunking the myth of shareholder ownership of companies: Some implications for corporate governance and financial reporting

Sikka, P and Stittle, J (2017) 'Debunking the myth of shareholder ownership of companies: Some implications for corporate governance and financial reporting.' Critical Perspectives on Accounting. ISSN 1045-2354

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Abstract

The shareholder primacy model is dominant in Anglo-Saxon corporate governance and financial reporting even though it is considered to be dysfunctional and a source of crisis. The possibilities of reforms are routinely stymied with the claims that shareholders are the owners of large corporations and management should promote their interests. This paper seeks to debunk such claims. It shows that a corporation is a distinct legal person and cannot be owned by its shareholders. It argues that shareholders in contemporary corporations are owners of ?fictitious? capital which is very distinct from ?real? capital. The systemic pressures require the holders of fictitious capital to constantly buy/sell shares in pursuit of short-term gains. The paper further shows that in a globalised economy, the shareholding duration in major UK companies has shrunk and shareholders are more dispersed than ever before. They are not in any position to control or direct corporations for the benefit of other stakeholders and society generally. The paper calls for abandonment of the shareholder model of governance and calls for empowerment of stakeholders with a long-term interest in the wellbeing of corporations.

Item Type: Article
Uncontrolled Keywords: Corporate governance; Share ownership; Fictitious capital; Financial reporting
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Accounting Centre
Depositing User: Jim Jamieson
Date Deposited: 20 Jun 2017 09:34
Last Modified: 13 Dec 2018 02:00
URI: http://repository.essex.ac.uk/id/eprint/19930

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