Marjorie Kelly challenges the notion that stockholders fund the corporation by pointing out that only the initial shareholders of a corporation actually fund the corporation. When shares change hands subsequently, the company does not actually receive that money from the shareholder. Only when companies sell new shares of stock do they receive money from shareholders. The secondary sales of stock benefit investment houses, brokerage firms, and the stockholders who choose to sell those shares, but companies receive no money from these secondary sales transactions.

In Kelly's view, shareholders contribute very little to justify what she calls companies' extraordinary allegiance to them in their decisions and loyalties. Her view is that the employees are the ones who create value for the corporation. Employees shoulder the burdens and yet are given very little consideration in return for their efforts. Employees' incomes are not determined according to the success of the corporation, but shareholders' returns and dividends are determined by the success of the corporation. Kelly does not see this system as a function of markets but a system of governance that could be changed very easily without affecting the role of corporation in economic systems. Kelly often quotes Lycophron, the ancient Greek philosopher when he was observing an Athenian slave uprising, "The splendor of noble birth is imaginary and its [prerogatives] are based upon mere word."

Because shareholder primacy is a mere structural and superficial system, Kelly believes that it can be changed quite easily. She also sees shareholder primacy as an entitlement and concludes that economists agree that entitlements have no place in a free market economy. Her proposal is to eliminate shareholder primacy and revise the primary responsibility of corporations to one of wider economic distribution of wealth. She notes that of the marketable wealth gain achieved between 1983 through 1998, more than half went to the richest 1 percent........................

Discussion Questions 1. List the differences in perceptions between Friedman and Kelly about corporations.
2. What distinction does Kelly make about shareholder ownership?