first tasks that the law demands of the team of people who form the corporation--indeed, it is a prerequisite for creating the separate legal entity - is that the team name a board of directors. The board of directors, then, is given all the authority to act in the name of the corporation, and to make decisions on its behalf. Once the corporation is formed, it becomes the owner of the assets and efforts contributed to it by financial investors, managers, and employees. It enters into more or less incomplete contracts and other relationships with the various participants about how much and under what circumstances they will be paid, and what rights they have under what circumstances. Relationships with employ shareholders are often among the least well-specified, while those with creditors and supplier quite well-specified But the key legal fact is that the original team members all agree to give up control rights the firm-specific inputs they contribute to the enterprise, and over the outputs. They all give up control rights to an internal hierarchy, headed by the board of directors. The board enjoys the ultimate decision-making authority to determine the use of corporate assets, to determine payouts to the various participants, and to serve as an internal"court of appeals to resolve disputes that may arise among team members. The board may include several team members, but it may also include a number of outsiders The act of forming a corporation, then, creates a separate holding tank for the tangible and intangible assets used in the productive efforts of the team. No one team member, nor any specific subset of team members is the"owner"of these assets. no one has full residual rights of control over the team, no one has full rights to the residual income generated by the team, and no one has personal liability for debts incurred and harms caused by the activities of the team Although the board of directors is granted many of the most important control rights, clearly they are not the owners. They have very wide discretion under the law in the way they exercise that control, but they also have fiduciary duties of loyalty and care in their roles as directors. These duties mean that directors cannot personally appropriate the assets of the firm to their own use. They also are not the primary residual claimants, and are not personally liable for the debts of the firm Managers and other key employees are also clearly not the owners" of the corporation. They may"own"a substantial amount of the human capital that goes into the enterprise, at least initially. But as they work to generate anything that is separable and alienable, those intellectual assets immediately become the property of the firm. Thus the biochemist's notes become the property of the firm as soon as they are put on paper. The patents received by the team of researchers belong to the firm, not to the 12 This is more closely analogous in the law to the role of trustees"(of, say, estates or nonprofit entities) than it is to the role of"agents" in principle-agent relationships12 This is more closely analogous in the law to the role of “trustees” (of, say, estates or nonprofit entities) than it is to the role of “agents” in principle-agent relationships. 7 first tasks that the law demands of the team of people who form the corporation -- indeed, it is a prerequisite for creating the separate legal entity -- is that the team name a board of directors. The board of directors, then, is given all the authority to act in the name of the corporation, and to make decisions on its behalf. Once the corporation is formed, it becomes the owner of the assets and efforts contributed to it by financial investors, managers, and employees. It enters into more or less incomplete contracts and other relationships with the various participants about how much and under what circumstances they will be paid, and what rights they have under what circumstances. Relationships with employees and shareholders are often among the least well-specified, while those with creditors and suppliers may be quite well-specified. But the key legal fact is that the original team members all agree to give up control rights over the firm-specific inputs they contribute to the enterprise, and over the outputs. They all give up control rights to an internal hierarchy, headed by the board of directors. The board enjoys the ultimate decision-making authority to determine the use of corporate assets, to determine payouts to the various participants, and to serve as an internal “court of appeals” to resolve disputes that may arise among team members. The board may include several team members, but it may also include a number of outsiders. The act of forming a corporation, then, creates a separate holding tank for the tangible and intangible assets used in the productive efforts of the team. No one team member, nor any specific subset of team members is the “owner” of these assets. No one has full residual rights of control over the team, no one has full rights to the residual income generated by the team, and no one has personal liability for debts incurred and harms caused by the activities of the team. Although the board of directors is granted many of the most important control rights, clearly they are not the owners. They have very wide discretion under the law in the way they exercise that control, but they also have fiduciary duties of loyalty and care in their roles as directors12. These duties mean that directors cannot personally appropriate the assets of the firm to their own use. They also are not the primary residual claimants, and are not personally liable for the debts of the firm. Managers and other key employees are also clearly not the “owners” of the corporation. They may “own” a substantial amount of the human capital that goes into the enterprise, at least initially. But as they work to generate anything that is separable and alienable, those intellectual assets immediately become the property of the firm. Thus the biochemist’s notes become the property of the firm as soon as they are put on paper. The patents received by the team of researchers belong to the firm, not to the