Are corporations obsolete?
Not exactly, says Margaret Blair, a senior fellow of the Brookings Institution, Washington. But, she argues, it might be time to change the way corporations are governed.
Ms. Blair, author of the upcoming book, "Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century," thinks it's time to challenge the notion that shareholders literally "own" the companies in which they invest.
She says current corporate governance arrangements fail to recognize the potentially risky "firm-specific" investments made by stakeholders who might or might not own common stock. Employees, for example, invest their "human capital" in specialized skills needed for their jobs. Other specialized investments are made by suppliers, lenders and others with an economic interest in a company, she points out.
By assigning some ownership rights to them, companies can encourage stakeholders to make bigger investments - and thus, take more risks - for the benefit of the company, she says.
Not surprisingly, Ms. Blair praises companies like Avis Inc. and UAL Corp., which have significant employee ownership.
"Increasingly," she said, "companies are finding out that it makes sense to count their employees among their significant shareholders."