Table 1 summarizes ownership rights characteristics of alternative organizational forms,
including open corporations, proprietorships, financial mutual companies, and traditional
cooperatives. For instance, the open corporation is characterized by unrestricted residual claims
that are non-redeemable but freely tradable among investors in secondary equity capital markets.
The horizon of residual claims is unlimited because they are rights in net cash flows for the life
of the organization. In addition, residual claimants are not required to play any other function in
the firm. The unrestricted nature of common stock residual claims enables the efficient
allocation of risk and the specialization of risk bearing and decision-making functions in open
corporations. Contrasting to open corporations, non-corporate organizational forms usually add
restrictions on residual claims that may affect asset investment and use as suggested in Table 1.