Paper Summary:

The economist Harold Demsetz is a leading advocate of the University of Chicago school of economics, largely considered to be a conservative theoretic school. This school advocates the idea that self-interest, rather than attempts to regulate economic behavior, produces the most salutary effects, economically. The paper shows that Demsetz specifically stresses the importance of property rights in terms of firm ownership in his landmark paper "The Structure of Ownership and the Theory of the Firm". The paper shows that this article addresses the question of what constitutes "the firm," structurally and theoretically.

From the Paper:

"Corporations are peculiar notions, legally and economically, in that they are considered "persons" under the law. The individuals who have a direct interest in their failure or success do not run firms, unlike the heads of single partnerships. Rather, firms are corporate structures that are made up of boards of directors, elected by shareholders. The more shares an individual owns in a firm, the more of an economic stake he or she has in the performance of the firm. Thus, the more of an economic stake in the firm possessed by any individual shareholder, the more votes he or she has in terms of electing the board of directors. The board of directors elects the chief executive of the firm."

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