Abstract
Historically, a corporation was regarded as an artificial creation of law
possessing only what rights and powers its constituting charter confers upon it.
This “concession” or “grant” theory has been
eclipsed, especially in the United States, by the view that the corporation is a
mere association of natural persons, and that its rights are those of its
“members” and “owners,” the shareholders, who, as
persons and citizens, bring even constitutional rights to the corporation. This
associational view rests on a triple confusion. First, it confuses the
corporation (the rights-bearing corporate entity) with the corporate firm, which
is associational, leaving the impression that the corporation can be reduced to
natural persons. This underwrites the second confusion, that the business
corporation is a member corporation, with the shareholders as members, when in
fact it is a property corporation without members. The histories of the Dutch
and English East India Companies are drawn on to explain the origins of this
second confusion. Third, it confuses the member corporation with a partnership,
when it imagines that the rights of the corporation are simply those of its
individual shareholders. Instead, as maintained by the grant theory, a
corporation should only receive such rights as are conferred on it by charter or
statute on the basis of policy considerations.
A Treatise on the Incorporation and Organization of Corporations Created under the "Business Corporation Acts of the Several States and Territories of the United States"