Onerous Property: Why the Business Corporation is Missing from Property Theory

Abstract

Property theory is thriving. Having been long dominated by a disintegrative approach building up on the bundle of rights concept, scholars are now reexamining essentialist models of property, with the right to exclude featuring prominently as property’s prospective core. These theories study various resources, from land to intellectual property, to pinpoint such an essence. Oddly enough, largely missing from these accounts is the most prominent source of wealth in today’s world: the business corporation. While corporate law theory is increasingly looking beyond the nexus of contracts theory to illuminate the firm’s proprietary foundations, property theory has yet to fit the business corporation into its newly integrative framework. The paper argues that this deficiency is not merely a coincidence. In many ways, the business corporation undermines the paradigms of current property theory. To start with, Berle and Means’s underlying notion of divorce of ownership from control in the business corporation seems antagonistic to the owner’s right to exclude or to ‘set the agenda’ for the resource. In addition, while property theory recognizes the need to pool together resources and overcome collective action problems, conventional models of property governance such as residential community associations seem alienated from the power relations and vertical authority within the business firm. Specifically, the setting of a majority shareholder enjoying a control premium alongside owing fiduciary duties to dispersed minority shareholders is allegedly at odds with the horizontal governance assumption in property theory. It may be even unfavorably viewed as reminiscent of obsolete modes of status-based stratification in property, going back to feudalism. This inconvenience does not release, however, property theory from accounting for the core nature of the business corporation. Moreover, the paper argues that once we move from a model of substantive essentialism to one that identifies the institutional and structural traits of property, then the business corporation becomes a much better fit for current property jurisprudence.