Disastrous Government: Decisions: Corporations

The Corporate Bankruptcy Act of 1898.

“The modern corporation dates back to 1601, when Queen Elizabeth I created the East India Trading Company. At the time, the concept of a corporation was quite different than today. Corporations were small, quasi-government institutions chartered by the crown for a specific purpose. The idea was to bring together investors interested in financing large projects, such as exploration. (Many American colonies were originally governed by corporations, such as the Massachusetts Bay Company). Kings and queens kept a close watch on these corporations and didn’t hesitate to revoke charters if they weren’t happy with the way things were being run. Investors were liable for any harm or loss caused by the company.” (Lee Drutman: The History of the Corporation)

If you read Mr. Drutman’s fairly concise article (I used this because it is an easy read, the information is available in thousands of places), you will find that Corporations gradually changed over 200 plus years.

In 1886 the Supreme Court ruled that they were protected by the 14^th Amendment just as people were. In 1889 the New Jersey started to allow corporations to own other corporations, and then in 1896 allowed them to have unlimited size and market share. In 1899 Delaware passed the “General Incorporation Law” allowing them to make all of their own rules. Today 60% of all corporations are chartered in Delaware.

The “Big Daddy” of them all was the Corporate Bankruptcy Act of 1898. After that corporations had the rights of any human: to be born, to live and grow, to die, and to go bankrupt.

However, the one thing they don’t have we mere mortals do have… is accountability and responsibility; i.e. they have limited liability in all of their actions.

A couple offshoots today are the Subchapter S corps (originally designed for professionals, but anyone can use them), and LLCs (Limited Liability Companies).

What does all this mean to each of us? Pretty much everything. A corporation can be formed, used to produce, promote, or manipulate anything. Even drug lords use them to cover actions. Cruise ships, tankers, most everything floating on the sea are incorporated to limit liability, mostly in such places as Panama & Liberia.

Customers, employees, and shareholders can get screwed with impunity (as well as the general public in so many ways). Just ask the people that owned and worked for Enron.

For every corporate officer that goes to jail, hundreds go to the Islands for a rest.

Multinationals even run countries. The Nestle corporation is so powerful it can dictate terms to governments in South America (they mostly peddle inferior baby formula, another story in itself). Columbia has had over 230 governments in the past 250 years and most had to get an ok from Nestle first before they could be formed.

You might ask, how else we can structure companies so that they can operate? The answer is quite simple: stock companies and bonds.

The difference is that in a stock company each and every shareholder is responsible for the actions of the company and has no limits on his/her liability. Until recently a lot of Insurance companies were stock companies and even their policy holders could get dividends if the company was managed properly and did well.

The largest of these is a quasi-stock company (actually a syndicate) called Lloyd’s of London. For centuries it handled insurance risks that no one else would. The “shareholders”, their List of Names, furnished the capital and took the risks. Usually they got their quarterly or yearly dividend and were happy as could be. Even Names such as Uncle Harry living in that house at the end of the street had a piece. That all changed in the last years of the 20^th century when Law Suits of all sorts descended on them until Parliament passed legislation limiting their liability to bad faith occurrences. Even they fell to the pressures of the modern era when no one has fault, liability, or responsibility.

The concept of a Stock company financed with shareholders and bond holders is not novel, but it protects everyone. It protects our environment, products, and insures we will not be at the hands of ruthless or incompetent corporations (and I am not saying they all are, but they all can be).

The Corporate Bankruptcy Act of 1898 sealed our fate in this matter. I don’t see anything changing in the near future, or ever. This has nothing to do with politics as both sides of the aisle were and still are responsible, and money and power is and always was, the major force in our economy.

The reason for these articles is that the more informed you are; the more you understand; the less likely you are to be disillusioned or depressed. At least, that is what I hope.

If you want to know more, fallow the above links, or Google any of this and look into it. It is really eye-opening.

Always be alert, we need as many “lerts” we can get,

The Hammer

Copyright Crickard Publishing 2008. All rights Reserved