Thursday, September 27, 2007

It doesn't matter, as Lynne Stout writes in today's WSJ, that companies perform best when managed by a board of directors and not by stockholders. Nor does it matter, as she also argues, that stockholders could (and would likely) drain a company of its cash and take other actions that would cripple its long term prospects.

All that matters is that the shareholders OWN THE COMPANY. The company, and of its net assets, are the PROPERTY of the owners. And owners have the right (subject to very few limitations) to do with their property what they wish.

So if the shareholders want to take all of the profits out in dividends and not leave any cash for R&D, that is their right. If shareholders don't want to invest money in projects that will take years to provide a return on investment, that is their right.

Sure, the shareholders may wish to take actions that you and I would deem stupid and shortsighted, but that is a right they have by virtue of their owning the property.

It's a bit surprising that the WSJ would give a voice to someone so dismissive of property rights but someone so dismissive of the right of voters (in this case, shareholders) to elect people sharing their principles and objectives (the board of directors) and to hold their representatives to doing what the voters want and not what the representatives want.

I don't know Stout's political philosophy, but she sure seems like your typical elitist snob... the kind of person who not only knows what you and I should do, but someone who wants to be able to force us to live the way she wants us to. To people like this, principles such as property rights and self-determination and so on don't matter... they're merely empty concepts ripe for being swept aside in order to allow us all to live better lives...