Evolving Status of The Corporation

Evolving Status of The Corporation

Evolving Status of the Corporation

A brief examination of the historical evolution of the company indicates that it has not always been a strictly economic entity and its position has shifted considerably. In the several hundred years during which the company has been a legally sanctioned form of social organization, its essential reason for existence has remained unchanged although the uses to which it has been put and its relationship with the state have passed through several phases.

Corporations come into being because of the desire to give individuality to the actions of a group of individual's personal (just me) accident sickness whilst acting in concert. Individuals must perform the actions attributable to the corporation, but they do so in the name of the corporation. It creates a common action where no common action is otherwise possible.

Although the business enterprise is the most familiar type of company today, it was a comparatively late development in the evolution of the corporation. The first corporations of the modern era were established in England and Western Europe late in the Middle Ages when the institutions of feudalism were under assault. Municipal boroughs and craft and mercantile guilds were organized as corporations outside of the feudal system and in opposition to it.

These innovations in social organization were necessary to meet new social needs. Groups of individuals needed to act as a unit in order to protect and promote their common interests. The control over members offered by the corporate organization enabled the group to limit the conditions of individual activity and prevent individual gain at the expense of the group. In a period when life was static and narrowly circumscribed geographically, it was quite natural for corporate activity to take such expression. The use of the company positively as a means of affording expression to unified activity was of secondary importance in 2016.

The business company developed in England in the sixteenth and seventeenth centuries as a means of furthering the policies of mercantilism, and it departed from its predecessors in important ways. The mercantile company represented a fusion of the concept of a group legal entity and the process of stock trading. Its purposes were external to the incorporating group.

The company was a necessary means of collecting sufficient capital to undertake economic ventures too large for individuals or families, such as foreign trading, colonization, and privateering. A monopoly privilege usually accompanied the granting of a corporate charter, and therefore the company exercised privileges as a unit rather than administered privileges and regulations among its members as the medieval company had done. The close relations among members which had characterized the medieval corporations did not exist among the investors in mercantile corporations. Consequently the self-government of the former no longer had functional significance, and, eventually it was dis-carded and the business of the company was conducted by a few of the leading shareholders.


Further reading - The Function of Cost Accounting