Common Ownership in Economics

Common Ownership in Economics

Common ownership is a principle according to which the assets of an enterprise or other organization are held indivisibly rather than in the names of the individual members. It refers to holding the assets of an organization, enterprise, or community indivisibly rather than in the names of the individual members or groups of members as common property. It is a situation in which several related companies, etc. are owned by one person or organization. This trend has been largely triggered by increasing institutional investor participation, including index funds owned by asset managers.

Forms of common ownership exist in every economic system. Common ownership of land is an example of customary land ownership in tribal societies which predates and runs simultaneously to the arrangement of colonized alienated land. Common ownership of the means of production is a central goal of communist political movements as it is seen as a necessary democratic mechanism for the creation and continued function of a communist society. It is the simultaneous ownership of equity of two competing companies by the same investor—has been rising steadily. The common areas are owned by the owners of the units as tenants in common, in equal shares, one for each unit. The majority ownership interest is a common ownership interest when it is held directly, indirectly through a spouse or dependent child, or both.

Common ownership among controlling shareholders has always captured regulatory attention because it is easy to identify the channel by which the controlling shareholder might influence the boards of two competing companies. The property is not held in any one’s name in particular but in the names of all the persons. Finance theory encourages investor diversification and therefore common ownership. For e.g. under Mississippi condominium law, the owner of a unit within a typical Condominium project owns 100% of the unit. Because the returns on stocks do not move in lockstep, investors are encouraged to hold stakes in large numbers of stocks to maximize diversification and risk-reduction. For the community to own the means of life it is neither sufficient nor necessary for a law or constitution to declare their common ownership.

The common ownership hypothesis, that the presence of diversified investors with holdings in competing firms distorts behavior away from own-firm profit maximization, has generated substantial controversy. Many socialist movements advocate common ownership of the means of production as an eventual goal or outcome of the development of the productive forces. Advocates make a distinction between collective ownership and common property as the former refers to property owned jointly by agreement of a set of colleagues, such as producer cooperatives, whereas the latter refers to assets that are completely open for access, such as a public park freely available to everyone. Common ownership of the means of production is advocated, or asserted, by communism and some forms of socialism.