Global Journal of Management and Business Research, D: Accounting and Auditing, Volume 22 Issue 2

ownership. Blair and Stout (1999, 250-251) note that, “corporate assets belong not to the shareholders but to the corporation itself.” Blair (2003, 293) explains that when founders incorporate, they become shareholders giving up the property rights to their personal assets in exchange for shares of he firm’s stock, which maintains their liquidity. Shareholders do not own the firm; they simply own the firm’s shares. The rights and duties shareholders have to the firm-assets stems solely from the contractual rights of shares. Shareholders who own voting shares have the right (a) to sell the share, (b) receive dividends if declared, (c) file derivate lawsuits against the board, (d) vote the proxy in important decisions, and (e) nominate and vote in board member elections. These rights that accrue to shares provide shareholders with political influence over board decision, but they are not property rights. c) Rights of Property Ownership As discussed, the FASB’s phrase, “claims to…resources” refers to the legal claims firm-members have to the firm-assets. Therefore, we use property law to evaluate the shareholders legal claims to firm-assets. While the notion of property ownership is embodied in the law, jurists have yet to “…capture the relation between the idea of ownership and the detailed rules of a private property system in a precise legal definition” (Waldron 1985, 334). Rather, our legal system defines ownership as a family of legal relationships to a thing, 4 sometimes referred to as a “bundle rights.” 5 These “rights” are actually a collection of rights, powers, duties, and liabilities , 6 where any single “right” is neither necessary nor sufficient to conclude ownership. 7 Despite its subjectivity , 8 4 For instance, “You have property in the suit of clothes you are wearing; your property is not the suit of clothes, but the rights you have in it…” (Bowen 1926, 41). “Property relates to the legal relationship with a thing and the power that is able to be exercised over the thing - not the thing itself ( Yanner v. Eaton 1999, HCA 53 per the majority Gleeson, CJ, Gaudron, Kirby and Hayne, JJ).” (Toner 2006, 81). 5 “The currently prevailing understanding of property in what might be called mainstream Anglo-American legal philosophy is that property is best understood as a “bundle of rights.” (Penner 1996). Also, “The conception of property as an infinitely variable collection of rights, powers, and duties has today become a kind of orthodoxy.” (Merrill & Smith 2001, 365). 6 Black's Law Dictionary (2009, 1138) defines ownership as, “The bundle of rights allowing one to use, manage, and enjoy property, including the right to convey it to others." 7 Honoré (1961, 138), referring to “right” as an “incident,” states that, “[These] incidents, though they may be together sufficient, are not individually necessary condition for the person of inherence to be designated owner of a particular thing…the use of ‘owner’ will extend to cases in which not all the listed incidents are present.” the bundle of rights approach to 8 While the family of resemblances approach results in blurred edges, as when a duck fails to quack, the term “ownership” is still meaningful. “[T]here is no common essence shared by all things we call ‘games’: board games, football, solitaire, throwing ball against a wall, and so on. But we can nevertheless use the word ‘game’ meaningfully. the question of ownership represents the dominant paradigm of property law. Legal scholars credit A. M. (Tony) Honoré (1921- ) with advancing the most generally accepted set of legal relations for ascertaining ownership. 9 In his seminal paper, “Ownership” (1961), Honoré lists 11 “standard incidents of ownership.” 10 The list includes: the rights to (1) possess, (2) use, (3) manage, (4) income, (5) capital, and (6) residuarity; the powers to (7) alienate (i.e., sell) and (8) transfer; the (9) duty to prohibit harmful use; the (10) liability to execution for personal debts and the (11) immunity (i.e., no liability) from expropriation. 11 d) Legal Relations These legal terms, rights , powers , duties, and liabilities , have precise meanings. Credit this to Wesley Newcomb Hohfeld (1879-1918), 12 a legal scholar who, tiring of the misuse of these terms, suggested a system of corresponding legal relations. Specifically, to exist, rights require duties and powers require liabilities , and vice versa. For example, in order for one to claim a right to possess a thing, others must have a duty to exclude themselves from that thing. 13 Similarly, in order for one to claim a power to create legal relations, another must have a corresponding liability to those relations once created. 14 Wittgenstein uses the phrase ‘family resemblance’ to refer to this sort of overlapping and criss-crossing resemblance.” (Warburton 2001, 232-233) 9 Penner (1994,861) notes that Honoré’s incidents of ownership, “[d]espite its oversimplicity,…still operates as a background understanding of property..” (p. 859) […] “A.M. Honoré played a decisive role in advancing the bundle of rights metaphor by cataloguing a generally accepted list of the “incidents” of property or ownership.” 10 I have adapted these incidents at the margins based on Munzer (1990). 11 If one has immunity from expropriation, this means that others have no power to take ownership. In terms of correlatives, if others have no power, the owner has no liability. Thus, immunity and no liability mean the same thing. 12 Wesley Newcomb Hohfeld (1879-1918) posthumously authored the seminal text, Fundamental Legal Conceptions, As Applied in Judicial Reasoning and Other Legal Essays (1919), largely based on his articles published in 1913 and 1917 in the Yale Law Review. 13 “The existence of a right is the existence of a state of affairs in which one person (the right-holder) has a claim on an act or forbearance from another person (the duty-bearer) in the sense that, should the claim be exercised or in force, and the act or forbearance not be done, it would be justifiable, other things being equal, to use coercive measures to extract either the performance required or compensation in lieu of that performance.” (Becker 1977, 8) 14 Regarding power, “The nearest synonym for any ordinary case seems to be (legal) ‘ability.’” (Hohfeld 1913, 45) For example, an agent has the power to create legal relations to which a principal will have a liability .“A general claim of most recent major works on the subject of property, especially the books of Becker, Waldron, and Munzer, is that the actual nature of property has been satisfactorily explained by the Hohfeld-Honoré bundle of rights analysis.” (Penner The Effects of Entity Shielding on Claims to Assets: Implications for Financial Reporting 24 Global Journal of Management and Business Research Volume XXII Issue II Version I Year 2022 ( )D © 2022 Global Journals