This chapter:

• looks at and describes the governance relationships between shareholders, directors and companies;

• reviews the roles of the major actors in the governance relationships;

• discusses limited liability;

• looks at the ‘shareholders contract’ – the articles of association;

• tests the role of the actors against existing theory.

The first chapter looked at the broad landscape of governance and surveyed the theoretical background; it offered new definitions of corporate governance that seek to overcome the shortcomings of established definitions and, in particular, included notions that go beyond the limited concept of shareholder primacy. It mentioned the chief component of corporate governance – the company – only in passing.

This chapter will deal with some of the formal characteristics of the company and other actors in the governance process. It will conclude by developing an argument that a more realistic description of what a shareholder is in these companies is not the owner of the company at all but the possessor of a different piece of property – the share itself. The argument for this requires an examination of the positions of the other parties who are involved in the company.