the-2520corporation.pdf

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EtymologyThe word "corporation" derives from the Latin Corpus (body),representing a "body of people"; that is, a group of peopleauthorized to act as an individual (Oxford English Dictionary ). Theword universitas also used to refer to a group of people but nowrefers specically to a group of scholars (see University ). InEngland the term corporation was also used for the localgovernment body in charge of a borough . This style was replacedin most cases with the term council in Britain in 1973, and in the

Republic of Ireland. The sole exception is the Corporation ofLondon which retains the title.

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Pre-modern corporationsCorporations have been present in some forms as far back as

ancient India and ancient Rome . Although devoid of some of thecore characteristics by which corporations are known today, theynonetheless were enterprises with a form of shareholders whoinvested money for a specic purpose. Such corporations in theRoman Empire were sanctioned by the state, while suchcorporations in the Maurya Empire were mostly privatecommercial entities. [9]

With the collapse of the Roman Empire, the Roman conception ofthe corporation merged with other views. Germanic tribes, forexample, maintained that a group entity in and of itself could havea separate identity from that of its members.


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1/8 share of the Stora Kopparberg mine, dated June 16 , 1288 .

A bond issued by the Dutch East India Company , dating from 1623, for theamount of 2,400 orins

Early corporations of the commercial sort were formed underframeworks set up by governments of states to undertake tasks

which appeared too risky or too expensive for individuals orgovernments to embark upon. The alleged oldest commercialcorporation in the world, the Stora Kopparberg mining communityin Falun , Sweden , obtained a charter from King Magnus Eriksson in 1347. Many European nations chartered corporations to leadcolonial ventures, such as the Dutch East India Company or theHudson's Bay Company , and these corporations came to play alarge part in the history of corporate colonialism .

In the United States , government chartering began to fall out ofvogue in the mid-1800s. Corporate law at the time was focused onprotection of the public interest, and not on the interests of



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corporate shareholders. Corporate charters were closelyregulated by the states. Forming a corporation usually required anact of legislature. Investors generally had to be given an equal say

in corporate governance, and corporations were required tocomply with the purposes expressed in their charters. Manyprivate rms in the 19th century avoided the corporate model forthese reasons ( Andrew Carnegie formed his steel operation as alimited partnership , and John D. Rockefeller set up Standard Oil as a trust ). Eventually, state governments began to realize thegreater corporate registration revenues available by providingmore permissive corporate laws. New Jersey was the rst state toadopt an "enabling" corporate law, with the goal of attracting morebusiness to the state. [10] Delaware followed, and soon becameknown as the most corporation-friendly state in the country afterNew Jersey raised taxes on the corporations, driving them out.New Jersey reduced these taxes after this mistake was realized,

but by then it was too late; even today, most major publiccorporations are set up under Delaware law.

The 20th century saw a proliferation of enabling law across theworld, which some argue helped to drive economic booms inmany countries before and after World War I (the advantage to theoverall economy of enabling laws must, however, be viewed inlight of the success of Carnegie Steel and Standard Oil, theeconomic stimulus of the war, the ourishing of the automotivesector, and other major economic drivers). Starting in the 1980s,many countries with large state-owned corporations movedtoward privatization , the selling of publicly owned services and



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enterprises to corporations. Deregulation -- reducing the public-interest regulation of corporate activity -- often accompaniedprivatization as part of an ideologically laissez-faire policy. Another

major postwar shift was toward development of conglomerates , inwhich large corporations purchased smaller corporations toexpand their industrial base. Japanese rms developed ahorizontal conglomeration model, the keiretsu , which was laterduplicated in other countries as well. While corporate efciency(and protability) skyrocketed, small shareholder control wasdiminished and directors of corporations assumed greater controlover business, contributing in part to the hostile takeover movement of the 1980s and the accounting scandals that broughtdown Enron and WorldCom following the turn of the century.

More recent corporate developments include downsizing ,contracting-out or out-sourcing, off-shoring and narrowingactivities to core business , as information technology , global trade

regimes, and cheap fossil fuels enable corporations to reduce andexternalize labor costs, transportation costs and transaction costs,and thereby maximize prots.

For a history of corporations that is “pro-corporate”, see JohnMicklethwait and Adrian Wooldridge , The Company: a ShortHistory of a Revolutionary Idea (New York: Modern Library, 2003).

For a history of corporations that is “critical”, see Joel Bakan, TheCorporation. The pathological pursuit of profit and power (Toronto:Viking Canada, 2004).



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Types of corporations

Most corporations are registered with the local jurisdiction aseither a stock corporation or a non-stock corporation. Stockcorporations sell stock to generate capital. A stock corporation isgenerally a for-prot corporation. A non-stock corporation does nothave stockholders, but may have members who have voting rightsin the corporation.

Some jurisdictions ( Washington, D.C. , for example) separatecorporations into for-prot and non-prot, as opposed to dividinginto stock and non-stock.

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For-prot and non-prot

Main article: non-profit organization In modern economic systems, conventions of corporategovernance commonly appear in a wide variety of business andnon-prot activities. Though the laws governing these creatures ofstatute often differ, the courts often interpret provisions of the lawthat apply to prot-making enterprises in the same manner (or in asimilar manner) when applying principles to non-protorganizations — as the underlying structures of these two types ofentity often resemble each other.

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Closely held and publicThe institution most often referenced by the word "corporation" isa public or publicly traded corporation, the shares of which aretraded on a public market (e.g., the New York Stock Exchange orNasdaq ) designed specically for the buying and selling of sharesof stock of corporations by and to the general public. Most of thelargest businesses in the world are publicly traded corporations.However, the majority of corporations are said to be closely held ,privately held or close corporations , meaning that no ready

market exists for the trading of shares. Many such corporationsare owned and managed by a small group of businesspeople orcompanies, although the size of such a corporation can be as vastas the largest public corporations.

Closely held corporations do have some advantages over publiclytraded corporations. A small, closely held company can oftenmake company-changing decisions much more rapidly than apublicly traded company. A publicly traded company is also at themercy of the market, having capital ow in and out based not onlyon what the company is doing but the market and even what thecompetitors are doing. Publicly traded companies also haveadvantages over their closely held counterparts. Publicly tradedcompanies often have more working capital and can delegate

debt throughout all shareholders. This means that people investedin a publicly traded company will each take a much smaller hit totheir own capital as opposed to those involved with a closely heldcorporation. Publicly traded companies though suffer from thisexact advantage. A closely held corporation can often voluntarily



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take a hit to prot with little to no repercussions (as long as it isnot a sustained loss). A publicly traded company though oftencomes under extreme scrutiny if prot and growth are not evident

to stock holders, thus stock holders may sell, further damaging thecompany. Often this blow is enough to make a small publiccompany fail.

Often communities benet from a closely held company more sothan from a public company. A closely held company is far morelikely to stay in a single place that has treated them well, even if

going through hard times. The shareholders can incur some of thedamage the company may receive from a bad year or slow periodin the company prots. Workers benet in that closely heldcompanies often have a better relationship with workers. In larger,publicly traded companies, often when a year has gone badly therst area to feel the effects are the work force with lay offs orworker hours, wages or benets being cut. Again, in a closely held

business the shareholders can incur this prot damage rather thanpassing it to the workers. Closely held businesses are also oftenknown to be more socially responsible than publicly tradedcompanies.

The affairs of publicly traded and closely held corporations aresimilar in many respects. The main difference in most countries is

that publicly traded corporations have the burden of complyingwith additional securities laws, which (especially in the U.S.) mayrequire additional periodic disclosure (with more stringentrequirements), stricter corporate governance standards, andadditional procedural obligations in connection with major



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corporate transactions (e.g. mergers) or events (e.g. elections ofdirectors).

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Mutual benet corporationsA mutual benet nonprot corporation is a corporation formed inthe United States solely for the benet of its members. Anexample of a mutual benet nonprot corporation is a golf club.Individuals pay to join the club, memberships may be bought andsold, and any property owned by the club is distributed to itsmembers if the club dissolves. The club can decide, in itscorporate bylaws, how many members to have, and who can be amember. Generally, while it is a nonprot corporation, a mutualbenet corporation is not a charity. Because it is not a charity, amutual benet nonprot corporation cannot obtain 501(c)(3)

status. If there is a dispute as to how a mutual benet nonprotcorporation is being operated, it is up to the members to resolvethe dispute since the corporation exists to solely serve the needsof its membership and not the general public. [11]

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Multinational corporationsMain article: Multinational corporation Following on the success of the corporate model at a nationallevel, many corporations have become transnational ormultinational corporations : growing beyond national boundaries to



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attain sometimes remarkable positions of power and inuence inthe process of globalizing .

The typical "transnational" or "multinational" may t into a web ofoverlapping shareholders and directorships, with multiplebranches and lines in different regions, many such sub-groupingscomprising corporations in their own right. Growth by expansionmay favor national or regional branches; growth by acquisition ormerger can result in a plethora of groupings scattered around and/ or spanning the globe, with structures and names which do not

always make clear the structures of shareholder ownership andinteraction.

In the spread of corporations across multiple continents, theimportance of corporate culture has grown as a unifying factor anda counterweight to local national sensibilities and culturalawareness.

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