corporation, n.

1) A body of persons acting under a legal charter as a separate entity with its own rights, privileges, and liabilities distinct from those of its individual members.

2) Any group of people combined into or acting as one body.

(source: American Heritage)

From the Latin corpus, body, a corporation is a body of people — a collective body treated as an entity distinct from its members. In short, a corporation is nonsense. No 'body' of people can act as one, as though they were merely parts of a whole being with a mind of its own. Yet a corporation is supposed to behave as just that, as though it exists in itself. In actuality a corporation is an invention, acting and existing in practical terms only as the cooperation, and in some cases the conflict, of individuals. Like a nation-state, a corporation exists only through the belief of its independent existence. Corporations are fabrications.

The private corporation we know as a standard today did not arise from a free market of individuals. It arose as an adaptation of business as conducted within an environment of legal interference with free exchange. The need for the ability to raise great amounts of capital for business endeavors led to this. The legal identity of a corporation allows large amounts of investment capital to remain associated with a fictional corporate 'person' as though it were private, allowing it to largely hide from taxation under that corporation, as the state pays attention to economic exchanges between legal individuals. It is very difficult or impossible to raise and maintain comparable assets without resort to state-chartered corporations. The corporation is a consequence of the history of legality and government, not a stage in the natural evolution of free economic activity. To put a positive spin on that, the corporation was in part an attempt to find financial freedom where it otherwise could not be found.

Unfortunately, corporations and government are intimately intertwined. The use of the word in a governmental context indicates this, as does the fact that the first economic corporations were mercantilist monopolies granted by authority of the British crown. In many ways, modern corporations are still heavily influenced by even very old law and very old government. For example, institutional investors have their permissible behavior influenced to short-term planning by 'the law of trusts' which originates from the English 'law of dukes.'

Corporations are often run too much like democratic states without territories. They have their executives, who are sometimes all too much like oligarchic rulers. They have their populist leaders as labor organizers. They have their voters, the stockholders. They exist because of belief in law, and they are collective organizations which can eclipse individual identity, like states. Corporations fail to serve the advantage of individual people, when they do fail, because they are businesses made of individuals, forced into the mold of states due to their existence within states. Remember, though, where this model came from.

A corporation is still not equivalent to a government or state. A government rules, legislates and enforces based on the monopoly of state power. A corporation is still a form of business, and still largely oriented around economic activity and exchange rather than control. However, economic corporations are supported in their very existence by official law, which is supported by force. Many corporations have also become similar to governments in being weighed down by bureaucracy. So much so, that 'corporate' is also now used to describe bureaucracy, unoriginality, and inertia found in business culture.

Corporations are not 'private' by their very definition and regulation according to public corporate law. That interdependence guarantees that corruption will occur, as interests in the commercial sphere influence political interests, and vice versa. We should notice that the corporate system, this corporatism, gives the state a special kind of control over all major business endeavors. What corporations are capable of in terms of concentrating capital can only be achieved in practice today with the legal sanction of the state.

The chief means of a corporation raising capital is by issuing stock, granting percentage shares in ownership of the corporation. For most practical purposes, those shares are not really percentages in the company. Owning 5000 shares from 100 million does not mean that a given shareholder is entitled to make any decision for any part of the corporation, or to cart away and sell 1/20000 of its assets. Nor does a much larger amount. This share system is a legal fiction. What really occurs is that the people who manage the affairs of the corporation and work within it are being loaned money for operations and expansion, in the hope that the corporation will make money. This will be repaid according to relative success or failure in business as it influences the perception of stock value, down to and including no repayment if the corporation collapses. The fiction that the ownership of the corporation exists in its shares allows corporations to raise vast amounts of capital, but there are problems with this device.

The most important and most famous problem is accountability. One of the excellent benefits of private property is personal responsibility. At least one person must own a company in Promethean capitalism in the sense that they are responsible for it, as well as profiting from its success. That is only the logical extension of private ownership in an individual free market. A corporation is a departure from this. There is limited personal liability for corporations. (A fact which often induces small business with no need of public stockholder capital to incorporate for protection from excessive and frivolous legal action.) In a large corporation, in many cases there is truly no one ultimately 'at the helm.'

I would suggest that this drawback of economic corporations lies with the governmental support (and in fact, legal enforcement) of their artificial internal structures, in which management — leadership — is largely divorced from both accountability and in many cases, from actual individual measures of profit and benefit, a situation exacerbated by size. This lack of accountability is similar in many ways to that of agents of government, for the same reason. Both executives and stockholders of a corporation, and government employees, are largely irresponsible because the imaginary collective is directly associated with their actions. When they act, the 'corporation' or 'government' is said to act. The reason why executive perks far in excess of executive performance tend to materialize is the same reason why legislative perks tend to materialize, or pork-barrel content in bills becomes law — accountability is removed from influential decisions. In theory perhaps, public corporations are responsible to their stockholders just as private companies are to their owners. But the link is an indirect one, as with government. One or a small number of stockholders, like a small number of voters, do not tend to matter. The proxy voting system has further exaggerated the distance between stockholders and decision-making, just as representation does in a democracy. (Which is not to say that decision by direct majority would function much better in this case than it did in the demagogic pure democracy of Athens — not when the voters do not have both the personal interest and the responsibility of direct ownership.)

The ability of corporate stock to raise capital is only a necessary advantage to the advancement and capabilities of a given corporation, not necessarily to any individual. Raising capital allows for expansion of a corporation, not necessarily greater profits for stockholders, greater benefits for customers, or higher pay or better conditions for employees. It is unclear how the corporation can be said to be an instrument of a free market, and voluntary exchange for mutual profit, since it is an imaginary entity in any agreement. Agreements made by a corporation may favor a corporation — but what exactly does that mean? It may mean that a corporation becomes more expansive. It may mean likely advantages and profit for people as with a free market, or it may not. Transactions in a free market are based on a personal and subjective determination of value — but a corporation is not a person. The more indirect and nebulous a corporation's interests as they are actually derived and acted out through the interests of actual people, the less a corporation is representative of a free market, and likely to achieve mutual benefit. Corporations may 'agree,' through their executive decisions, that cartel price fixing to decrease competition between them (in order to undercut other competition or maintain 'stability') is in the corporate interest. They may decide that influencing political processes is in the interest of the corporation. And corporations have, historically, ignored the terrible conditions of their workers too often, as labor leaders have claimed. That is tied to thinking of workers as part of a corporation, who serve the interests of the corporate body, rather than as independents who are pursuing their own interests as they exchange the valuable capital of labor. The tendency of labor organizations to consider labor as a mass, however, is no real remedy for this collectivism.

A company, on the other hand, is a word and a concept which describes a group sharing companionship and relationship in some way — a reality. A real 'company' in an economic sense (sole proprietorship or partnership) is a cooperative endeavor between individuals. This kind of organization, whether founded on solitary ownership and employment, or mutual ownership and decision by a group of individuals, as with a partnership or the extended 'family' of a kibbutz, can be fully compatible with the individual and voluntary nature of Promethean capitalism. A company can exist as a group of individuals with direct and personal relationships to ownership and decision in both profit and responsibility, with clear exchanges for mutual benefit between individuals within the company, as well as a cooperative focus among them.

It must be stressed that there are many corporations whose executives consider themselves responsible for what they do, and that many stockholders consider themselves responsible. Many corporations prosper exclusively, or almost exclusively, by providing superior goods and services which are a boon to customers and by treating employees with respect, without and often in rejection of potential advantages which might be derived from fascist collusion. The benefits of corporations tend to follow the extent to which they act as companies, not the extent to which they are akin to governments.

The best corporations are usually those who are not run primarily by committee and group bureaucracy, as governments are. They are those run primarily by one person or a small number, and even associated in public with one responsible person. There is both clear leadership of the direction of such a corporation, and a face behind it. In this case the corporation is less the product of 'corporate' thinking than individual thinking. As with many things, from artistic creation to politics, supposed 'collective' achievement in management becomes in practice inactivity, cowardly indecision, or decision-making which is poor because of a lack of personal vision.

That many corporations function as companies, that is as cooperative endeavors between individuals as though they did exist within a free market, is a credit to those responsible. We should realize, however, that such corporations do not depend on the corporate system to function in this way, and rather, do so in spite of it. Those who would found, maintain, and support this kind of success within a corporation within a larger fascism, would do so just as easily in the competition of a free market. In fact, they would likely experience much greater success and less hindrance. These people have nothing to fear from a free market’s competition, or from the abolition of corporate law. Those who would exploit fascistic corporatism, however, will continue to support the way things are. They cannot earn the same position without the advantages of legal compulsion to reinforce undeserved monopolies, and without imaginary legal identity.

Many objections to corporations relate to size. Most sensible objections to 'big corporations' actually have to do with their facelessness and lack of accountability as discussed above, or with exploitation, oppression, and trickery used to become that size. Would the same problems of unscrupulous practices be likely to occur in a free market composed of independent individuals, and truly private companies (and other cooperative groups)?

The ability to compete includes convincing consumers to look favorably upon a company. Because buying is still a choice, even if the existing corporate system is not a product of free economic choices, corporations are in practical terms often more responsible to the customer than they are to their 'owners,' the shareholders. This link between corporate profit and voluntary exchange can often hold corporate misdeeds in check, whether in organized boycotts and campaigns, or in the sum of individual reactions. But this is offset by the sheer size of large corporations. Corporate law gives an advantage to size, regardless of competitive advantage. Corporations manage regulations, taxes, and lawsuits with relative ease.

A company which attains the size of a major corporation in a free market, with full competition and accountability, is exceedingly unlikely to have obtained its position through exploitation. There are simply too many opportunities to expose such a company when it has no opportunity for collusion with government and ruin its reputation, or to compete with it in prices, wages, or treatment before it reaches a great size. Private ownership also tends to ensure that companies will remain smaller in general due to competition.

One of the great strengths of capitalism is competition. The greatest personal advantage of this is possibly not that services and goods must improve and prices must drop in order to attract consumers. These are simply the most common and widespread advantages. It is more important that capitalism involves a peaceful contest for gain by trade, which like athletic contests among warrior societies offers a means besides war to provoke one another to excellence. The expenditure of energy in such a contest can be satisfying, strengthening, and even ennobling, even to those who are not the most successful of all. That very human, very intimate advantage for the capitalist is lessened considerably under corporatism, first when the personal face of one’s peer and good-natured contestant is instead a more faceless organization, and second when corporate stability is sought and maintained, and competition is often feared. In consideration of the human nature involved, individualistic ownership is essential in order to gain both the personal and the common fruit of competition.

To criticize corporations in the modern sense is not necessarily to criticize capitalism. Indeed, Promethean capitalism necessitates having no corporations in the legal sense or the collective sense. We might say that the corporation really belongs to the socioeconomic circumstance of the state, as part of the state — a socialist container for common ownership, and a fascist instrument of control and collusion between business and government. It was not for nothing that Mussolini said "fascism is corporatism."

Corporations are myths which have arisen as a consequence of legality and government, perpetuated by legal force, a province of government. This realization is important because it illuminates for critics of capitalism the problems associated with the system of incorporated business which is called 'capitalism,' but does not actually belong to a free-market of individuals. For free-market advocates, this realization can help to show why they must not defend the corporate system itself as they would defend free-market capitalism and its benefits. To do so is to defend a corruption of free enterprise.

Corporations are also unnecessary within free markets. The corporate advantage of raising capital safe from interference is a meaningless one within a free market not dominated by the state. Any voluntary grouping of capital, including cooperative efforts between companies of people, is free to form in Promethean capitalism, instead of the capital of large corporations. The human and personal benefits associated with corporations need not be products of the current system of corporate entities, and they will be augmented in the absence of the corporation as it exists today. The worst problems commonly associated with capitalism may likewise be left behind with the corporation and the state.

There are solid reasons for objecting to corporatism, and for objecting to many actions taken by those within certain corporations. But those who would attack corporations directly, especially using the legal system to build more regulation within corporate law, have it wrong. They are merely compounding the centralized concentration of the state. Getting beyond corporations is part of getting beyond law. With the absence of government comes the elimination of the legal system, which is all that supports the existence of the collective entities known as corporations, and is the reason for their evolution in the first place. In a Promethean society corporations will not exist.

<< Promethean Capitalism contents
< previous, Part Ten: Charities
> next, Part Twelve: Commercialism