Nick has left a new comment on your post "Answering the Two Hesitations to Business Start-up...":
John, you said: "the corporation is not an ethical business structure"
This intrigues me, I'd like to learn why you think this... have you any posts that speak to this point?
Thanks!
Hey Nick,
The line you cite pushed its way forward while I was writing, your citation brings it to focus. I'll start with Drucker, who wrestled with the corporation, its role and value, his entire career. Somewhere, long ago I read where he wrote something to the effect that he questioned where the corporation got its legitimacy. Drucker was good that way, there is an immediate obvious answer, but the more you think about it, the more you question.
The immediate answer is "the state that issued the corporation charter." OK, where did it gets its authority to issue charters? Well, it's constitution under the Federal system. OK... where did they get their power? Ultimately it goes back to that first corporation, the US of A. And then where did it get what powers it claims?
Next, we have shifting definitions from them to now, definitions still shifting and in debate. Our idea of a corporation today would be absurd a century ago, and two centuries a corporation was merely a definition of a project. People formed a corporation to collect money to build a bridge, it was naturally a toll bridge, the purpose of which was to attract traffic over an easier route, good for everyone. These were hardly thought of as "persons" in the law. But that is where we are today. Today as a practical matter, with no particular limits as to purpose (see Bush family Zapata corp) corporations are the vehicle for privatizing profits and socializing costs. If you want to trace this in the history of the usa, I recommend Morton Horwitz' The Transformation of American Law, 1780-1860 (Studies in Legal History)
Finally, there is a business organization option that is legitimate, and every bit as useful as the corporation in achieving goals, the co-operative. The have all of the capabilities of a corporation, but a co-op gets its legitimacy from its customers, not the state. it is formed by people for a particular purpose, and cannot much stray. Its losses are on its members (who are necessarily its customers) and its gains are automatically dispersed to the customer/owners. There are no classes of stock (there is no stock), so now referential treatment among members. Now that sounds somewhat analogous to the corporation, but in a case of wrongdoing, a co-op is not served papers (it is not a corporation) the individual doing the wrongdoing is served, or all of the members. (Co-ops do insure heavily). With a co-op the malfeasant cannot escape responsibility, with a corporation it is pretty much assured miscreant will escape.
If the USA is a legitimate form of government, it is because it is "from the people, by the people for the people." A co-op is exactly the same with a much smaller focus. The USA makes claims as to its powers that are debatable, but a co-op has no need or interest in debatable claims.
And for what it is worth, co-ops tend to pay taxes, and corporations not. Having to pay taxes, and be responsible to the community, or be tax free and not responsible, which would you choose?
The corporation as a business entity fails in practice and applicability. It's the wrong tool for the job, and it provides for unfortunate ends. If you need to get big, do so by customers acclaim, not because as a corporation you can issue enough debt to buy off a supreme court and transfer private property from its rightful owners to your private ends, or any one of countless other unfortunate uses of the corporation.
The solution is to deny the state its assumed power to charter corporations.
Feel free to forward this by email to three of your friends.
John, you said: "the corporation is not an ethical business structure"
This intrigues me, I'd like to learn why you think this... have you any posts that speak to this point?
Thanks!
Hey Nick,
The line you cite pushed its way forward while I was writing, your citation brings it to focus. I'll start with Drucker, who wrestled with the corporation, its role and value, his entire career. Somewhere, long ago I read where he wrote something to the effect that he questioned where the corporation got its legitimacy. Drucker was good that way, there is an immediate obvious answer, but the more you think about it, the more you question.
The immediate answer is "the state that issued the corporation charter." OK, where did it gets its authority to issue charters? Well, it's constitution under the Federal system. OK... where did they get their power? Ultimately it goes back to that first corporation, the US of A. And then where did it get what powers it claims?
Next, we have shifting definitions from them to now, definitions still shifting and in debate. Our idea of a corporation today would be absurd a century ago, and two centuries a corporation was merely a definition of a project. People formed a corporation to collect money to build a bridge, it was naturally a toll bridge, the purpose of which was to attract traffic over an easier route, good for everyone. These were hardly thought of as "persons" in the law. But that is where we are today. Today as a practical matter, with no particular limits as to purpose (see Bush family Zapata corp) corporations are the vehicle for privatizing profits and socializing costs. If you want to trace this in the history of the usa, I recommend Morton Horwitz' The Transformation of American Law, 1780-1860 (Studies in Legal History)
Finally, there is a business organization option that is legitimate, and every bit as useful as the corporation in achieving goals, the co-operative. The have all of the capabilities of a corporation, but a co-op gets its legitimacy from its customers, not the state. it is formed by people for a particular purpose, and cannot much stray. Its losses are on its members (who are necessarily its customers) and its gains are automatically dispersed to the customer/owners. There are no classes of stock (there is no stock), so now referential treatment among members. Now that sounds somewhat analogous to the corporation, but in a case of wrongdoing, a co-op is not served papers (it is not a corporation) the individual doing the wrongdoing is served, or all of the members. (Co-ops do insure heavily). With a co-op the malfeasant cannot escape responsibility, with a corporation it is pretty much assured miscreant will escape.
If the USA is a legitimate form of government, it is because it is "from the people, by the people for the people." A co-op is exactly the same with a much smaller focus. The USA makes claims as to its powers that are debatable, but a co-op has no need or interest in debatable claims.
And for what it is worth, co-ops tend to pay taxes, and corporations not. Having to pay taxes, and be responsible to the community, or be tax free and not responsible, which would you choose?
The corporation as a business entity fails in practice and applicability. It's the wrong tool for the job, and it provides for unfortunate ends. If you need to get big, do so by customers acclaim, not because as a corporation you can issue enough debt to buy off a supreme court and transfer private property from its rightful owners to your private ends, or any one of countless other unfortunate uses of the corporation.
The solution is to deny the state its assumed power to charter corporations.
Feel free to forward this by email to three of your friends.
3 comments:
Right now I'm a one-man company, just starting out. What about staying as a sole-proprietorship, even if my company grows to be pretty big (in sales and additional employees)? What are the pros and cons?
Well, there is the theoretical framework from which one may proceed to arrive at some rational progress, and then there are the practical decisions based on your circumstances, informed by theory. So this is more a question for a CPA than me.
But, the bottom line is concentration of power.. the more you are "in-charge" the less you are tapping the creativity of others... co-ops seem to attract people who are on their way to something else or bigger than their "jobs." The best manager is always still in charge, and anyone can always do better then working for someone else... it may be harder, take more time, but the results are better.
Surely we learn from others, and we ultimate work for the customer, so apprenticeships and such have always been a good idea... but as to employees, if you have such, give them a year contract with the promise they will not be rehired at that job. Up or out. Rather like government... no one should ever spend more than 2 years a lifetime working in government.
Thanks John for answering my question.
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