Who Should Control a Corporation? Towards a Contingency Stakeholder Theory for Allocating Ownership Rights

A number of companies allocate ownership rights to stakeholders different from shareholders, despite the fact that the law attributes these rights to the equity holders. This article contributes to an understanding of this evidence by developing a contingency model for the allocation of ownership rights. The model sheds light on why companies, despite pressures from the law, vary in their allocation of ownership rights. The model is based on the assumption that corporations increase their chance to survive and prosper if the stakeholders supplying ‘‘critical contributions’’ receive the ownership rights. According to the model, ‘‘critical’’ contributions involve (1) contractual problems due to specific investments, long-term relationships, and low measurability; (2) the assumption of the uncertainty resting on the company; and (3) the supply of scarce and valuable resources. The model is dynamic because it also provides a basis for understanding why the allocation of ownership rights changes with time. Finally, the article presents the strategies companies can use to realize an efficient distribution of ownership rights among their stakeholders.