Capitalism and the Corporation Essay

Submitted By catnty
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The problem to be investigated is the development of the corporation and the ever evolving role it plays in different societies. This paper will attempt to address this by researching the history of the corporation, the difference between European, British, and U.S. corporations, the definition of stakeholders, and the effects of social democracy on capitalism.
By definition, a corporation is a fictitious legal person separate from the people that formed it and its existence can be traced back to early Greek civilization (Williston, 1888). Corporations, in its early forms were founded in order to organize government, church, and later different trades that banded together as business associations (Williston, 1888). Michael Novak (as cited in Jennings, 2012, pg. 105) found that businesses and businessmen had always been looked at by the rest of society as something less than desirable and downright suspect of taking advantage of others. These sentiments were made evident by the early Roman’s, when they formed business associations that, many times, benefited the members more than they benefited society (Williston, 1888). Originally, corporations where only allowed to be formed if they served some greater good to the public, for example, for the construction of roads, and government played a major, if not the only role, in its existence (Williston, 1888). The modern corporation, in many societies, has over time, moved from government ownership to private ownership, and with that transition came the era of capitalism and Novak (as cited in Jennings, 2012, pg. 106) stated that capitalism has always had its share of critics, but at the same time opened the doors to independence from government and allowed societies to become self-sufficient. Novak stated (as cited in Jennings, 2012, pg. 106) that in the United States, the state merely approves the formation of a corporation, but the corporation itself is not controlled by government, but by its owners and that businesses, then and now, serve and are responsible to its owners, customers, and investors. A possible characteristic of a capitalist environment might be how easy it is to start a business and form a limited liability or public limited corporation. In the United States, in order to form a corporation, one must only choose a name compliant with a state’s corporation rules, appoint directors, file paperwork, pay a filing fee – usually less than $1000, create operating rules, hold the first board meeting, issue shareholder certificates, and ensure that proper licenses and permits are obtained (Mancuso, 2011). The United Kingdom follows a similar approach; the filing fees are around £20 and in both instances, no minimum start-up capital is necessary. It may be safe to say that the corporation is formed because it will contribute to society. Novak (as cited in Jennings, 2012, pg. 106) argues that business enterprise creates jobs, provides goods or services, and pays taxes to the government in which it does business in, thereby creating wealth for all. But what if the business fails? Who will take care of displaced workers, debt owed to third parties, or any other damages? In some German speaking countries (Germany, Austria), a limited liability corporation or public limited company is formed much like the ones in the United States and United Kingdom. However, the laws require a minimum start-up capital that is provided by the individuals starting the corporation and they are personally liable; currently this amount is at least €50,000 (Diederich, 2011). In addition these types of corporations are required to have a two-tier management system, one manages the company, and the other oversees the management and for every two members on the supervisory board, there must be one member representing the employees (Bohinc, 2011). This does but two things. One, it makes it more difficult for a corporation to be formed, which in and of itself may be against a free market economy,
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