There is widespread, deep-seated, and fundamental confusion about the ownership of the publicly traded corporation, which manifests itself in the common practice of referring to shareholders as the owners of a corporation. This practice is at odds with the legal reality that a corporation, as a legal person, owns itself. At a time in history when the role of corporations within a capitalist system is a topic of heated debate, maintaining this confusion is an important barrier to a constructive exchange of ideas about redesigning corporate governance. Economic theorizing is an important cause of confusion but also offers a possible solution. The crux of this solution is to understand the corporation in ‘team production’ instead of ‘principal-agent’ terms. A team production analysis of the corporation not only aligns with the legal reality that shareholders do not own the corporation but also leads to the conclusion that it would be comparatively inefficient if they did. A meaningful discussion about redesigning corporate governance should recognize these two facts. As a first step towards such a discussion, we should stop referring to shareholders as the owners of corporations.
