« The Bright Yellow Rope | Main | Origins of CSR and Stakeholder Theory »

July 4, 2006

A brief history of the corporation

I've been thinking a lot lately about how corporations came to be and how they came to be so powerful. There is nothing wrong in my mind with powerful corporations. More important is how they exercise their power and what moral, ethical and legal power we have to place constraints on their exercise of power.

It put me in mind of something I read some time ago written by Art Kleiner - The Age of Heretics

Kleiner, summarizing John P Davis' book Corporations (Capricorn Books1961), traces the history of the modern corporation back to “the monasteries of the early Christian Church’. Commercialisation came when the mercantile stock companies began organizing expeditions to far parts of the globe across dangerous waters:

If a ship failed to return, the owner would qualify for debtor’s prison; if an owner died before a ship returned, his creditors might not be paid. Thus European kings and queens chartered corporations — creatures of legal sovereignty, named after the Latin word for “body.” The stock company had no human body, but it was corporeal in every other sense. It could own property, outlive its human members, and borrow or lend money. The monarchs had designed these new institutions to carry out the policies that they found too risky to undertake themselves.

Kleiner goes on to recount a major turning point in corporate history when, in 1811, the New York legislature

established a blanket corporate charter. Anyone who met the legal criteria was automatically granted the powers of a company.

This led to a flurry of legislation as the states of America at one and the same time competed to attract entrepreneurs but also limit those same entrepreneurs’ abuse of privileges the legislatures had granted them. Finally, Kleiner concludes:

By 1945, … the commercial corporation had come to dominate the culture of the world.

I have posted this brief history because over the next few days I want to discuss the purpose of corporations. Corporations were, and still are, created by an act of the state. Individuals are given protection and privileges under law to act as a company. In return the state can expect those same companies to meet certain obligations and responsibilities. There's plenty of room to discuss what those obligations and responsibilities might be, but that they exist and corporations have both a legal and moral duty to meet them is beyond dispute.

Posted by chriscurnow at July 4, 2006 11:08 AM

Trackback Pings

TrackBack URL for this entry:
http://www.chriscurnow.com/cgi-bin/mt/mt-tb.cgi/309

Comments

Post a comment