For decades, the prevailing dogma of the corporate world has been absolute: companies exist solely to generate profit for their shareholders. This principle of shareholder primacy dictates the behavior of executives, the design of financial markets, and the expectations of investors across global economies. Yet, a growing body of legal scholarship and economic history suggests that this foundational premise may be built on a profound misunderstanding of corporate law. As digital assets and decentralized finance search for sustainable governance models, revisiting the history of corporate structures—and challenging the myth of shareholder ownership—offers a radical new perspective on how crypto protocols might be designed.
The modern consensus that corporations should be run exclusively for the benefit of investors is, historically speaking, a relatively recent phenomenon. For the majority of the 20th century, American corporations operated under a completely different paradigm known as managerial capitalism. Defined as a form of capital accumulation and organizational control in which managers act as the central agents of power, this era belonged to what sociologists termed the "Organization Man." During this period, the legal control of a company was largely decoupled from its direct ownership. Professional administrators viewed themselves not as agents serving a transient class of stock-traders, but as stewards of permanent, enduring institutions. Their stated responsibility was to balance the complex, often competing interests of a broad array of stakeholders, ranging from employees and suppliers to local communities and customers, rather than catering exclusively to shareholders.
Of course, this immense managerial discretion often carried a dark side, frequently giving rise to corporate self-dealing and executive excess. The tendency for corporate leaders to treat company assets as personal fiefdoms was vividly captured in books like Barbarians at the Gate, which detailed the legendary "RJR Air Force"—a lavish fleet of private planes utilized by the CEO of R.J. Reynolds for weekend golf outings and personal trips to private vacation properties. In one infamous and frequently cited instance, the sole passenger aboard a corporate jet was the chief executive’s German Shepherd, which was flown home early from a weekend retreat to escape the fallout of biting someone.
These very real excesses of managerial capitalism were later immortalized in popular culture, most notably in Oliver Stone’s film Wall Street. In a memorable cinematic monologue, the corporate raider Gordon Gekko berates the shareholders of Teldar Paper, arguing that they are being systematically exploited by the company’s entrenched management. Gekko famously tells the assembled investors that they are being royally screwed over by bureaucrats indulging in steak lunches, hunting and fishing trips, corporate jets, and golden parachutes.
Gekko’s core message to Teldar’s shareholders—that they ultimately owned the company and that executives were merely hired hands obligated to work for them—was deeply rooted in the economic philosophy of Milton Friedman. In a seminal 1970 essay published in The New York Times, Friedman argued that in his capacity as a corporate executive, the manager is fundamentally an agent of the individuals who own the corporation. In a free-enterprise, private-property system, Friedman asserted, a corporate executive is an employee of the business owners with a direct responsibility to conduct operations in strict accordance with their desires. For publicly traded companies, he reasoned, shareholders were the definitive owners, meaning executives answered to them and them alone.
Intuitive and pervasive as that framework appears today, legal scholar Lynn Stout argued that the entire premise is fundamentally flawed. In her work, Stout maintained that corporations own themselves, acting as independent legal entities in much the same way that human beings own themselves. What shareholders actually own, she explained, are not pieces of the company itself, but rather shares—a specific type of contract established between the individual shareholder and the legal entity that grants investors limited, highly defined legal rights.
A careful review of that contract reveals no stipulation that corporate executives work directly for shareholders, nor does it mandate that investors should be prioritized over any other stakeholder group, whether those are employees, customers, suppliers, the broader society, or the natural environment. The entrenched idea that corporations must be managed strictly to maximize shareholder value is, according to Stout, an assertion based on factually mistaken claims about the law.
Nevertheless, shareholder primacy is precisely how United States corporations have been operated almost universally for the past three or four decades—ever since the cultural ascendance of the Gordon Gekko ethos. Stout lamented the pervasive short-termism she believed this philosophy fostered, arguing that the cult of shareholder primacy forced companies to chase near-term quarterly profits at the expense of vital, long-term capital investments. (Though counterarguments persist, such as the massive, long-horizon boom in artificial intelligence investment, which appears to challenge the notion that modern firms are entirely incapable of patient capital allocation.)
Rather than maintaining the status quo, Stout advocated for a deliberate return to the principles of managerial capitalism. In her historical analysis, this earlier iteration of capitalism successfully built massive, foundational infrastructure—such as canals and railroads—with far less regard for immediate financial returns and a much stronger focus on long-term utility and societal value. Investors in these early corporate entities were frequently also their customers. Consequently, they structured their enterprises to ensure the business provided reliable service at a reasonable price, rather than obsessing over maximizing investment returns for passive outsiders.
This historical tension naturally raises a critical question for modern digital economies: Is that how crypto protocols should be structured as well?
The central debate currently consuming the cryptocurrency and decentralized finance space revolves around how to grant token holders the exact kinds of rights that traditional stock shareholders think they possess in mainstream finance. Developers and governance forums constantly debate tokenomics, voting weights, and revenue-sharing mechanisms designed to mimic traditional equity models.
However, if Stout’s legal analysis of the corporation is correct, chasing traditional equity rights may be the entirely wrong strategic goal for crypto networks. Without formal ownership rights over a centralized entity, digital tokens might attract a different breed of investor—one resembling the 19th-century capitalists who eagerly funded canals and railroads for reasons extending far beyond immediate financial extraction.
Railroads and canals were foundational networks, after all—interconnected systems that arguably never would have been built if 19th-century companies had been operated strictly to maximize short-term profits for external shareholders. Decentralized protocols are networks, too. Even though these protocols are frequently operated and discussed in the language of traditional corporate entities, Stout’s work demonstrates that there is more than one viable model for determining what kinds of rights investors should hold.
If crypto protocols are intended exclusively to maximize returns for speculative investors, then token holders should indeed be granted formal rights that cement their status as Gordon Gekko-like owners. However, if crypto finance is truly meant to pioneer a new kind of participatory capital, it might prove far more productive to grant token holders fewer rights—or perhaps none at all.
Rather than offering the kinds of heavy-handed legal protections likely to attract pure profit-maximizing speculators, protocols could instead rely heavily on their actual users to fund and sustain their development. This approach might allow decentralized networks to evolve into organizational forms fundamentally distinct from the profit-maximizing corporations of the late 20th century.
Conceivably, this structural shift could provide the most reliable guarantee for token holders themselves. Investors who are simultaneously active users of a network may ultimately be treated far better than investors who act solely as passive owners. When the customer and the capitalist are unified into the exact same participant, the only way to successfully maximize value for both investors and users is to build and maintain something that actually works.
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