3.1 A short history of the corporation  (Page 12/7)

Introduction

In this module you will learn about the history of corporations. Antecedants of the modern corporation can be found in the Middle Ages, the Renaissance, and in the Industrial Revolution in Great Britain and the United States. Corporations have evolved into their present form as the synthesis of discrete solutions to specific historical problems that have arisen in the practice of business. This module has been designed for courses in (1) business, society, and government, (2) business ethics, (3) corporate governance, and (4) corporate social responsibility.

What you need to know …

The history of the corporation

This historical process has produced five functions that characterize the modern corporation. corporations have emerged as...

1. "Passive devices" that hold property
2. Structures designed to exert monopoly control over and regulate a domain of specialized knowledge and skill
3. Means designed to pool capital and resources including human resources
4. A legal shield that protects owners and investors from liability and helps to spread and distribute financial, moral, and legal risk
5. Organizational decision-making structures that subordinate and synthesize the actions of human agents to bring about collective goals such as building a railroad, designing and manufacturing automobiles, and pursuing legitimate business ventures.

Passive devices that hold property

When the abbot of a medieval monastery died, public officials had difficulty determining to whom its property, wealth, and resources passed. While this is hard to conceptualize from a modern standpoint, during the Middle Ages, no legal distinction could be made between (1) managing property owned by others, (2) exercising stewardship over property owned by others, and (3) owning property. Moreover, the concept and practice of owning property is complex. "Property" in its modern sense has been spelled out as a bundle of distinct rights including "the right to possess, control, use, benefit from, dispose of and exclude others from the property." (DesJardins: 37) These distinct rights are not given as entailments of a natural concept of property but represent legally endowed capacities designed to respond to specific practical problems. So, to return to the problem created by the death of the abbot, a legal entity (called the church) was created and endowed with the one of the bundled rights accompanying the notion of property, namely, the right to possess and hold property (Stone 1974: 11)