What is a Corporation: Evolution, Features and Purpose
The corporation has been defined in many ways as interpreted by individuals; however lawyers and economists call it a nexus of contracts. This means that a corporation is nothing but a sum of all the agreements which lead to its creation. Corporations are also defined as a device for obtaining individual profit without individual responsibility.
To define it more visually, a corporation is a structure established wherein different parties come together and each provides capital, labor or expertise to maximize profits for all of them. A corporation has wide variety of constituents and it needs to relate to all of them; like investors, shareholders, customers, employees, suppliers, creditors, government and finally the community.
Legally, a corporation is identified as a fictional person for some purposes however the corporation itself is separate from its owners and employees. This means, what is owed to the corporation cannot be owed to the people who make the corporation. So is a corporation is sued or gets bankrupt, the individual members of the corporation are not liable to pay the debts.
Let us explore the evolution of corporations into the form we know today. To begin with, in the earlier times, the educational and religious corporations were given considerable independence and perpetual existence to evade the all encompassing power of the king. Later, corporations were set to address states specific needs like establishing colonies during the colonial era. Initially, corporations were characterized by a few wealthy people who negotiated amongst themselves, invested capital and worked towards maximizing profits. However later in the nineteenth century; the rapid technological progress brought the idea of having larger firms employing hundreds and sometimes thousands of people. The other significant aspect was the need for the capital which was earlier provided by a few wealthy members but now proved inadequate to support the operations of such large firms. The ramification of these changes was the emerging acceptance of the concept of private property which was hitherto unknown as all properties were considered to be belonging to the state or the religious institutions like churches.
There are certain critical features of the corporation which helped its popularity and laid the foundation for the modern day form as we know today.
Lastly the society can regulate corporate actions through taxes and fines and direct them to pursue not just economic but social goals as well. Corporations have also gone through the Darwinian principle of natural selection and evolution. So the processes and systems keep changing with the time and context in which the corporations operate.
- Corporate Governance - An Overview
- What is Good Corporate Governance ?
- The Role of the Government
- Accountability of Corporate Decisions
- Significance of Corporate Behavior
Authorship/Referencing - About the Author(s)
The article is Written By Prachi Juneja and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.