The Essence and Theoretical Foundations of the Concept of Joint-Stock Companies

The article examines the economic essence of the joint-stock company and the theoretical foundations on which the concept rests. The joint-stock form is treated not as one legal form among several, but as an institutional answer to a definite economic problem: the mobilisation of capital in a volume and for a term that exceed the capacity and the planning horizon of any individual owner. On the basis of the historical genesis of the form, six constitutive features are identified — the division of capital into shares, limited liability, separate legal personality, perpetual succession, transferability of shares and delegated management — and for each of them the legal content is distinguished from the economic function it performs. Seven theoretical approaches to the nature of the corporation are then compared: the transaction-cost, managerial, contractual, agency, property-rights, legal-entity and stakeholder approaches. The comparison shows that these approaches are complementary rather than mutually exclusive, and that a complete definition of the joint-stock company requires elements of each. A structural and functional model of the company is proposed, representing the movement of capital from its providers through the governance bodies to the assets and back in the form of return, and the joint-stock company is compared with the partnership and the limited liability company across eight criteria. The article concludes that the separation of ownership from management is simultaneously the source of the form’s capacity to mobilise capital and of its central contradiction, so that corporate governance and disclosure are conditions of the viability of the form rather than external requirements imposed upon it.