Corporation

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Also a book and video about the corporation as a dysfunctional format of governance.

See also: the debate on Corporate Personhood


Corporation as Concept

Description

"H.J. Berman describes a corporation (universitas) as a ‘‘body of people sharing common legal functions and acting as a legal entity." (https://www.ris.uu.nl/ws/files/20096187/_PUB_SilentRevolution_IRSH_53_Suppl.pdf)

See: H.J. Berman, Law and Revolution: The Formation of the Western Legal Tradition. (Cambridge, MA, 1983)


History of the Corporation

David Korten

"Buccaneer is a colorful name for the pirates of old who pursued personal fortune with rules of their own making. They were, in their time, an iconic expression of “free market” capitalism.

Privateers were buccaneers to whom a king granted legal immunity and safe harbor in return for a share of the booty. Their charge was to extract physical wealth from foreign lands and peoples by whatever means—including the execution of rulers and the slaughter and enslavement of native inhabitants.

Hernán Cortés claimed the Mexican empire of Montezuma for Spain. Hernando de Soto made his initial mark trading slaves in Central America and later allied with Francisco Pizarro to take control of the Inca empire based in Peru.

Some privateers operated powerful naval forces. In 1671, Sir Henry Morgan (yes, appreciative British kings granted favored privateers with titles of nobility in recognition of their service) launched an assault on Panama City with thirty-six ships and nearly two thousand brigands, defeating a large Spanish force and looting the city as it burned to the ground. As with the buccaneers and privateers of days past, Wall Street’s major players find it more profitable to expropriate the wealth of others than to find honest jobs producing goods and services beneficial to their communities.

Eventually, the ruling monarchs turned from swashbuckling adventurers and chartered pirates to chartered corporations as their favored instruments of colonial expansion, administration, and pillage. The sale of public shares enabled a single firm to amass virtually unlimited financial capital and assured the continuity of the enterprise beyond the death of its founders. Limited liability absolved the owners of personal liability for the firm’s losses or misdeeds.

Corporations chartered by the British Crown established several of the earliest colonial settlements in what later became the United States and populated them with bonded laborers—many involuntarily transported from England—to work their properties. The importation of slaves from Africa followed.

The East India Company (chartered in 1600) was the primary instrument of Britain’s colonization of India, a country the company ruled until 1784 much as if it were a private estate. In the early 1800s, the East India Company established a thriving business exporting tea from China, paying for its purchases with illegal opium.

The Dutch East India Company (chartered in 1602) established its sovereignty over what is now Indonesia and reduced the local people to poverty by displacing them from their lands to grow spices for sale in Europe.

It is no exaggeration to characterize these forerunners of contemporary publicly traded limited liability corporations as, in effect, legally sanctioned and protected crime syndicates with private armies and navies backed by a mandate from their home governments to extort tribute, expropriate land and other wealth, monopolize markets, trade slaves, deal drugs, and profit from financial scams.

Wall Street hedge fund managers, day traders, currency traders, and other unlicensed phantom-wealth speculators are the independent, unlicensed buccaneers of our day. Wall Street banks are modern day commissioned privateers who ply a similar trade with state backing and safe harbor. The economy is their ocean. Publicly traded corporations serve as their favored vessels of plunder, financial leverage is their favored weapon, and the state is their servant-guardian.

As with the buccaneers and privateers of days past, Wall Street’s major players find it more profitable to expropriate the wealth of others than to find honest jobs producing goods and services beneficial to their communities. They walk away with their fees, commissions, and bonus packages and leave it to others to pick up the costs of federal bailouts, gyrating economic cycles, collapsing environmental systems, broken families, shattered communities, and the export of jobs along with the manufacturing, technology, and research capacities that go with them.

They seek self-enrichment by plundering wealth they had no part in creating, enjoy substantial legal immunity, and acknowledge no duty or accountability other than to themselves. Legal or not, taking the property of another through deception, fraud, and expropriation is theft. Only tyrannies guarantee the liberty of the few to plunder the wealth of the many." (http://www.yesmagazine.org/blogs/david-korten/on-the-origin-of-corporations)


David Graeber

Excerpt – “municipal corporations”

from: Debt: The First 5,000 Years by David Graeber ; Chapter Ten THE MIDDLE AGES (600 – 1450 AD)

"The striking thing is that the Confucian condemnation of the merchant, and the Islamic celebration of the merchant, ultimately led to the same thing: prosperous societies with flourishing markets, but where the elements never came together to create the great merchant banks and industrial firms that were to become the hallmark of modern capitalism. It’s especially striking in the case of Islam. Certainly, the Islamic world produced figures who would be hard to describe as anything but capitalists. Large-scale merchants were referred to as sĀhib al-mĀl, “owners of capital,” and legal theorists spoke freely about the creation and expansion of capital funds. At the height of the Caliphate, some of these merchants were in possession of millions of dinars and seeking profitable investment. Why did nothing like modern capitalism emerge? I would highlight two factors. First, Islamic merchants appear to have taken their free-market ideology seriously. The marketplace did not fall under the direct supervision of the government; contracts were made between individuals—ideally, “with a handshake and a glance at heaven”— and thus honor and credit became largely indistinguishable. This is inevitable: you can’t have cutthroat competition where there is no one stopping people from literally cutting one another’s throats. Second, Islam also took seriously the principle, later enshrined in classical economic theory but only unevenly observed in practice, that profits are the reward for risk. Trading enterprises were assumed to be, quite literally, adventures, in which traders exposed themselves to the dangers of storm and shipwreck, savage nomads, forests, steppes, and deserts, exotic and unpredictable foreign customs, and arbitrary governments. Financial mechanisms designed to avoid these risks were considered impious. This was one of the objections to usury: if one demands a fixed rate of interest, the profits are guaranteed. Similarly, commercial investors were expected to share the risk. This made most of the forms of finance and insurance that were to later develop in Europe impossible.

In this sense the Buddhist monasteries of early Medieval China represent the opposite extreme. The Inexhaustible Treasuries were inexhaustible because, by continually lending their money out at interest and never otherwise touching their capital, they could guarantee effectively risk-free investments. That was the entire point. By doing so, Buddhism, unlike Islam, produced something very much like what we now call “corporations”—entities that, through a charming legal fiction, we imagine to be persons, just like human beings, but immortal, never having to go through all the human untidiness of marriage, reproduction, infirmity, and death. To put it in properly Medieval terms, they are very much like angels. Legally, our notion of the corporation is very much a product of the European High Middle Ages. The legal idea of a corporation as a “fictive person” (persona ficta) — a person who, as Maitland, the great British legal historian, put it, “is immortal, who sues and is sued, who holds lands, has a seal of his own, who makes regulations for those natural persons of whom he is composed”166—was first established in canon law by Pope Innocent IV in 1250 ad, and one of the first kinds of entities it applied to were monasteries—as also to universities, churches, municipalities, and guilds.

The idea of the corporation as an angelic being is not mine, incidentally. I borrowed it from the great Medievalist Ernst Kantorowicz, who pointed out that all this was happening right around the same time that Thomas Aquinas was developing the notion that angels were really just the personification of Platonic Ideas.168 “According to the teachings of Aquinas,” he notes, “every angel represented a species.”

Little wonder then that finally the personified collectives of the jurists, which were juristically immortal species, displayed all the features otherwise attributed to angels … The jurists themselves recognized that there was some similarity between their abstractions and the angelic beings. In this respect, it may be said that the political and legal world of thought of the later Middle Ages began to be populated by immaterial angelic bodies, large and small: they were invisible, ageless, sempiternal, immortal, and sometimes even ubiquitous; and they were endowed with a corpus intellectuale or mysticum [an intellectual or mystical body] which could stand any comparison with the “spiritual bodies” of the celestial beings.

All this is worth emphasizing because while we are used to assuming that there’s something natural or inevitable about the existence of corporations, in historical terms, they are actually strange, exotic creatures. No other great tradition came up with anything like it.170 They are the most peculiarly European addition to that endless proliferation of metaphysical entities so characteristic of the Middle Ages—as well as the most enduring.

They have, of course, changed a great deal over time. Medieval corporations owned property, and they often engaged in complex financial arrangements, but in no case were they profit-seeking enterprises in the modern sense. The ones that came closest were, perhaps unsurprisingly, monastic orders — above all, the Cistercians — whose monasteries became something like the Chinese Buddhist ones, surrounded by mills and smithies, practicing rationalized commercial agriculture with a workforce of “lay brothers” who were effectively wage laborers, spinning and exporting wool. Some even talk about “monastic capitalism.”

Still, the ground was only really prepared for capitalism in the familiar sense of the term when the merchants began to organize themselves into eternal bodies as a way to win monopolies, legal or de facto, and avoid the ordinary risks of trade. An excellent case in point was the Society of Merchant Adventurers, charted by King Henry IV in London in 1407, who, despite the romantic-sounding name, were mainly in the business of buying up British woolens and selling them in the Flanders fairs. They were not a modern joint-stock company, but a rather old-fashioned Medieval merchant guild, but they provided a structure whereby older, more substantial merchants could simply provide loans to younger ones, and they managed to secure enough of an exclusive control over the woolen trade that substantial profits were pretty much guaranteed.172 When such companies began to engage in armed ventures overseas, though, a new era of human history might be said to have begun."

Discussion

Point of view of the Binary Economics movement

"Also referred to as a "joint stock corporation." The modern business corporation is an institution or legal entity that can be used to limit the liability and any claims on non-corporate personal assets of its owners when the corporation enters into contracts, borrows money, carries out its operations, and serves consumers in local as well as global markets. The corporation is a creation of the law (i.e., a "legal person"). Its purpose is to acquire, aggregate and coordinate technological and financial capital with labor inputs. It facilitates access to financial markets, while insulating its shareholders from the risk of default on corporate debts and obligations. All the assets of a corporation are owned collectively by the corporation itself, with the shareholders owning shares of the company's stock. Except upon dissolution of the corporation, no shareholder or creditor may make a personal claim on any particular capital assets owned by the corporation, unless those assets are pledged as collateral on a corporate loan.

From the advent of the industrial revolution, and increasingly so in today's Information Age, the corporation has become the arena for growing abuses by those who manage and control them, and has failed to live up to its potential for serving as society's most important institution for balancing the untapped productive growth of a market economy with the purchasing power needed to absorb the goods and services the private sector is capable of producing. Most, if not all, of these drawbacks of the corporation can be overcome by democratizing corporate accountability and transparency systems and increasing corporate dividend distributions to a broadened base of corporate shareholders, especially its workers." (http://www.cesj.org/definitions/glossary.html)



Book

Book: Joel Bakan. The Corporation.


Review

By Dave Pollard:

"Joel Bakan's book The Corporation argues that, in their single-minded pursuit of short-term profit at any cost, corporations now behave pathologically (see graphic above), and against the public interest. Is the corporation, as a model, a hopeless case, or can it be reformed or reinvented?

There are many who believe corporate charters can and should be rewritten to require the pursuit and balancing of a so-called "triple bottom line" -- social and environmental as well as financial performance. Many others think this is naive (there are no established or easy measures or benchmarks of social or environmental performance) and unreasonable when the three bottom lines are in irreconcilable conflict -- the company that chooses to emphasize profit over the other two will, in our 'free' market, outgrow and hence dominate and even eliminate its more balanced competitors.

Even those who argue that the three bottom lines should, in the long run, coincide, have to concede that in the short term -- the horizon of most corporate shareholders and managers -- profits always trump social and environmental responsibility.

Corporations were originally invented to allow people to raise money for large ventures. Without the opportunity for substantial return, and limited liability, investors would not advance funds where there was considerable risk. But soon, ownership of 'shares' was confused with ownership of the business. Then, thanks to an incompetent legal error, corporations were granted the rights of 'persons' -- the right to sue, to lobby, and to otherwise use the collective wealth of the company to influence legal, political, economic and social affairs far beyond protecting the security of the original investment. At this point, the sole objective of the corporation became to satisfy the shareholders insatiable demand for higher returns and lower risk on their investment, at any cost to the real 'owners' of the enterprise -- the employees and the community who granted the corporation the privilege of existence.

The end result -- pathological behaviour, a Frankenstein monster out of control of its master. So what can be done? Is the corporation salvageable? If not, how can we revoke corporate charters without precipitating economic chaos?

Bakan proposes stronger regulation and enforcement, greater legal liability for officer and directors, public education, and regulated use of the precautionary principle to govern corporate behaviour. Other corporate reform advocates have proposed, in addition to the above, the elimination of 'personhood' rights, moving public well-being activities back from the private to the public sphere, standard global corporate codes of conduct (with severe penalties for breaching them), putting "triple bottom line" objectives into corporate charters, prohibiting dishonest corporate advertising, ending subsidies for large corporations, scrapping or redrafting 'free' trade and other corporatist and anti-democratic regulations, and taxing pollution, speculation and other 'bads'. I've personally advocated not allowing corporations to own other corporations, restricting the number of corporations any one person can beneficially control to one, and putting a size cap on corporations." (http://blogs.salon.com/0002007/2007/10/16.html#a2009)

Video

Strongly recommended video documentary: " The Corporation "

YouTube playlist version available at http://video.google.com/videoplay?docid=-3969792790081230711

extract from http://en.wikipedia.org/wiki/The_Corporation:

"The Corporation is a 2003 Canadian documentary film critical of the modern-day corporation , considering it as a class of person and evaluating its behaviour towards society and the world at large as a psychologist might evaluate an ordinary person. This is explored through specific examples."

More Information

  1. Marjorie Kelly. The Divine Right of Capital
  2. David Korten. When Corporations Rule the World ; The Post-Corporate World