Corporate Command

Half a millennium or so ago, businesses were small, and usually in the form of partnerships. A business was begun by the parties investing their own money, or from loans. If the enterprise failed, the partners suffered the direct consequences—either losing their money or sometimes going to jail.

Larger business enterprises were needed in the West by the 17^th century, because governments could not finance all the adventures that they desired—such as expansion into colonial domains. The first corporations were formed at that time; such as the Dutch and English East India Companies. These entities were chartered by the state, and were expressly restricted to entering into market efforts for public purposes only. So the state held considerable power over corporations, to be sure that their ventures were for the good of the people.

In order to promote the creation and success of these first corporations, the state granted them considerable political and military power, in order to protect their investments in far-off lands. The money to establish a corporation was raised from wealthy investors, who then realized large profits from these lucrative enterprises. Unlike partnerships, the charter of corporations contained limited liability provisions—that protected the investors from failure of the venture. The corporation might become bankrupt, but the shareholders were not financially liable—at the worst they would lose their initial investment.

Due to this support from the state, these first corporations often were very successful. The markets established in India and other Eastern countries earned their shareholders enormous gains—to a large extent due to their political and military power that they wielded over those weaker states.

By the 19^th century, corporations had gained sufficient power to begin to be able to influence laws back in the home country. Some of those laws allowed corporations to enter markets that no longer had to conform to public needs. In this way they accrued ever greater profits and power, which allowed them to become increasingly independent of the state.

Into the 20^th century the conflicting demands of corporate shareholders, boards, management, and employees brought about a jockeying between these various interests. By mid-late century, corporate boards began shifting priorities to the needs of shareholders and management (thus away from employees and the public), when they began to link management’s pay to the share price and profits.

This gradual accumulation of ever-greater corporate power encouraged risk and entrepreneurial adventures, which allowed corporations to become the behemoths that are now often international in nature and beyond the control of any state. Today corporations command almost unlimited power, no longer needing even to consider the needs of citizens—let alone their employees.