What is a Corporation?
A corporation is a legal entity that is not a person. Defined by its articles of incorporation and bylaws, it is a container for property managed by a representative council called a board of directors, who make strategic decisions on behalf of investors. Therefore, a corporation can own property and enter binding contracts, and it may sue and be sued in civil court.
Some people get upset (very upset) that corporations have any rights at all. These people have forgotten that corporations are property owned by people, so at least the property rights of those people are attached.
Moreover, if corporations couldn't write binding contracts, then there wouldn't be much point to having them. Can you imagine having several million passive investors sign every contract as if they were partners? Our society would lose the ability to pool capital except through government. Communists would like that, but everyone else should find it intolerable.
Because a corporation is not a human person, it can't vote, hold office, or go to prison, and, in spite of its contract writing power, it can't get married.
Some people look at some corporations' large accumulations of property and see quasi-governmental entities like small nations unto themselves. This is a misapprehension. Corporations are not governments. Until they hire their own armies and police to rule over us, until they charge us taxes, until they tell me what is illegal in my life, they do not govern me. Corporations may withhold their property from me, but they can't invade my life the way a government can unless a government is involved. People who foolishly grant ever greater power and scope to government in an attempt to curb "evil" corporations are actually giving corporations the tools to rule the world.
Therefore, restricting the power of government is the key to restricting the power of corporations. Remember, the government is the largest, most monopolistic and least accountable "legal entity" of them all, and it does enforce its edicts with deadly force!
Not Every Corporation is Big
And not all big businesses are corporations. Next time someone rails against "corporations", ask them how much they hate the Red Cross. Then rattle off the names of local restaurants, charities and other small businesses.
Indeed, most corporations are small. Quite often, they're just business shells for individuals to encapsulate risk capital, and satisfy government regulations, without exposing their private lives.
A few rants may have some validity behind them somewhere, but they're worthless until people clarify their thinking. Then they will use correct terminology and perhaps see clearly enough to finger the real culprits - individuals in bad business and the corrupt government that protects it.
Lest my "free" market ranting be mistaken for anarchism, please allow me a moment to apologize: I advocate fair markets, not wild, dog-eat-dog, anarchist markets.
Profit versus Exploitation
Just as there are misguided, society-flagellating moralists who live in daily fear that somebody somewhere is experiencing pleasure, there's a large, twisted segment of the populace who cry in horror whenever they see or suspect that somebody (else) is making profit. Leftists can not imagine any justification for any profit. They can imagine unjust ways to create a profit, so to them all profit is evil. Poor vision and understanding is a lame foundation for a pillar of a philosophy, so we should not be surprised that leftist socialism has failed as dismally as it has.
Announcement: Just as there are criminal shortcuts to profit, there are also reasonable justifications:
1.Delayed gratification: When your labor earns you money, you've earned a marker entitling you to consume some resources for your personal gratification. If instead you devote those resources into productive capital benefiting others, you're entitled to interest.
2.Increased Productivity: Even more, by increasing your productivity (or creating productive jobs for others), you've increased the total amount of wealth in society. You're entitled to a reward for the benefits to others.
3.Risk: If there's a chance that you may not recover your interest and may even lose your investment, then the potential gain must be great enough to overcome it. In other words, the most optimistic entrepreneur who can succeed at a venture must be offered enough potential profit that the net expected return (after weighing the chance of loss) is somewhat more than return of investment plus interest.
That last factor, risk, is the least understood. It adds a big multiplier to risky ventures. If the profit in risky ventures were not great, then only fools would attempt them (and fail), while the wise would either consume their resources in the present or save only in the safest, pedestrian ways, never challenging civilization's hurdles. Only government, spending other people's money would then do "great things".
Therefore, free society buys great breakthroughs by allowing great profits... which are arguably less expensive than the government's "great things" anyway.
Losses and Bankruptcy
Not every business makes a profit. They hope for profit, but they have no guarantee. Risk of loss motivates good organization and justifies profit from success.
Sadly, leftists wish to abolish both, eliminating the motivation to be wise and the penalties for foolishness. They wish destruction upon any corporation making a profit and then turn around and beg for government bailouts at the moment such wishes are about to be fulfilled.
Society benefits by allowing weak organizations to fail. Corporations are not people. A corporation can die, but its people survive it. The weak organization relinquishes its human, financial and other resources. Those resources become fuel for better organizations to create new wealth that the other couldn't.
Sadly, by demanding equal outcomes, leftists preserve badly managed corporations long beyond their expiration dates to the detriment of all of society. Ironically, these same people usually argue so persuasively for evolution by natural selection and survival of the fittest in nature, but they utterly fail to see the power of the principle among inanimate corporations. Again, I chalk it up to shortsighted, static thinking that can't look beyond today's bankruptcy, and that can't envision how people and other resources can find new organizations.
Like so many other tools (and even other forms of organization), corporate organization can be used or abused. As voters, we need to demand carefully circumscribed policies that punish what is evil without recklessly depriving ourselves of much that is beneficial.
Copyright 2003-2008 by Jeffry R. Fisher: Permission is granted to reproduce this article in whole, but only in combination with attribution, the original title, the original URL, and this copyright notice.