Business Organizations as Natural Objects of Ownership (Or, Business Organizations as Things)

Given the importance of “property rights” in American law and culture, academic and judicial disagreement over the content of the concept is a problem. Professor Eric Claeys makes considerable progress toward resolving this problem in his forthcoming book, Natural Property Rights. Using John Locke’s labor theory of property, the treatise offers intelligible limits to the kinds of objects that can qualify as property and guidance on how legal rights should operate for a given category of objects. The book also identifies several examples of American law that already follow a Lockean framework. The chapters Designing Property Rights and Dividing Property Rights pull examples from cases discussing property rights in animals, land, and water. Professor Claeys uses unfair competition doctrine to concretize part of his conceptual project, but he does not offer examples that apply his natural property rights framework to business organizations. This essay is the first to use Professor Claeys’ natural property rights approach to explain the law of business organizations. Business organizations are the quintessential object of Lockean property because they are created by their proprietors exercising the required control. Put differently, exercising control to create a business is an ideal example of using one’s labor to create a valuable object and the associated natural property rights. Moreover, the right to control a business is itself an object of ownership that can be transferred as a subcomponent of the broader rights in a business. Finally, several features of the Lockean approach may help us to better understand and resolve some contentious corporate governance debates. For example, Locke’s assumption that the world’s raw materials belong to everyone in common might shed insight on the debate over whether to prioritize shareholder profits or stakeholder interests