A Corporation is any legal entity that comes into existence after a proper registration process developed by law or directly by following legislation. Corporate entities operate as either a profit seeking or nonprofit businesses that have distinct legal rights and liabilities. Corporations are considered as legal persons that are responsible for various obligations and have the rights to serve and lead in the society just as any human being does. In the recent years, modern corporations and their policies have been playing a vital role for economic growth. In order to know how the modern corporations stand as powerful enough for any economy, it is important to understand and know the history of modern corporations of how they were created.
During the reign from 527 to 565, the Roman law recognized a need to establish a number of corporate entities that could consist of body of people, developing contracts with each other, owning properties and acting legally on behalf of their representatives. Entities were created to earn profits and enjoy legal rights, which could survive longer than the human lives as well (Tolentino, 2013). The Maurya Empire in an ancient India and ancient Roman encouraged hugely the establishment of private entities. Then in 1347, King Magnus Eriksson provided a charter to the oldest commercial corporation named as Stora Kopparberg. Stora Kopparberg was a mining community in Sweden and Falun. Following this, the medieval Europe led to the incorporation of local governments and churches. That time, partnerships were very common where people would gather together with the sole purpose of earning profit, living under the law. The European nations took the lead and chartered various corporations naming the most successful “Hudson’s Bay Company” and “Dutch East India Company.” Consequently, the competition grew among the traders, and thus corporations started to play a considerable positive role to serve the interest of public. During that time, corporations were structures on a temporary basis with fixed capital, rights, and durations of almost 20 years. As there was a dire need of more investments, the investors got an encouragement to come to the markets. They also enjoyed the limited liability option according to which they were not liable to pay the debts of a corporation.
The corporations came as powerful and passive devices. They brought skills, knowledge, capital, resources, having property (the right to use, possess, benefit form, and control property) and legal shield to remain away from legal, financial, and moral risks. In the 18th century, the American corporations were deprived of the facilities to operate with independence and act properly as corporate powers. Finally, Americans became an independent nation and got the ultimate sovereignty to maintain and operate freely. The middle of 19th century gave the business world huge opportunities as it could exercise its freedom and rights, living under the charters. Following the revolution, various incorporation laws were enacted. In the period of 1890-1930, various giant corporations emerged named as US Steel, DuPont, and State Oil. Corporations started to create more huge wealth for the nations and employed hundreds of people. They became extremely powerful and strong to challenge in the courts.
A range of States such as America became lucky enough to be called a Corporate State due to the big and modern corporations developed. The big and giant corporations became extremely modern, introduced restructuring, mergers, and consolidation to become the complex units. By the 1990, they moved beyond the traditional boundaries and developed new concepts such as marketing alliances, co-branding deals, R&D agreements, and co manufacturing projects. Consequently, the global network created in which all the corporations were operating with common interests. By 1997, the largest economies of the world were recognized by their corporations that were larger than their economies even. The 20th century closed its last few years with a huge and phenomenal success of big and modern corporations. The corporations did not only set up economic and industrial agendas, but also brought cultural agendas as well, making a mark in the history and getting ready for the new century.
Social conflict theory is based on the work of Karl Marx in which he studied and analyzed the society in a great depth, bringing into highlight its negative and conflicting aspects (Cohen, 2000). Conflict theory focuses on a social group and the persistent social, political, or material inequalities in society from which deviant behaviors come into existence. The theory brought the idea of how power and coercion of certain social groups prompt the competition among them. It discussed that society is divided into various social groups that compete to gain social and economic resources. In addition to that, it also emphasized on how wealth is just confined to certain groups, making others deprived. According to the conflict theory, those groups that are wealthy in terms of social, political, and economic resources dominate and manipulate the society and move ahead with common interests. Society is hardly controlled by conformity and consensus. As a result, those who have power, excessive wealth and resources are able to dominate the society, creating racial, class, and gender differences and thus bring change. As a result, society is divided into certain groups who have different levels according to their power, wealth, and resources.
Karl Marx believed that society needed change and revolution. As a certain powerful groups, thus problems and inequalities develop in a society. For example, labor in a business can never reach and compete at the position of an industrialist, as he does not own that much wealth. He will get motivation and appreciation, but he is unlikely to reach the level of CEO. This creates class and level differences and thus money and power remain with the wealthy, creating inequality.
Emile Durkheim developed the concept of Functionalist theory but later on Harvard Sociologist Talcott Parsons simplified it (Gane, 2002). Functionalist theory is all about that happens in any society. It discusses the society from all aspects such as its movements, operations, or functions. It believes that society is an organized system in which each part has its own role and function. Society consists of people who follow same beliefs and values. According to the theory, members in society though relate to different parts of society but they support each other. They come with their own particular purposes but ultimately they help the overall society to get stable and interdependent. It also emphasizes on the fact that society is broken into various parts due to which it has to face troubles and problems. Functionalist theory finds out the ways and functions through which a society operates and brings social consensus. People help each other, bring productivity, and work together to make the best society as a whole. For example, discussing from the perspective of modern or big corporations that if they provide the society with best products and services, but same time pollute and damage the environment by their operations then the problem in one part of society affects the whole society. An entire environment feels the impacts.
Mack and Young created the Interactionist theory that focuses on the everyday life of individuals (1968). It finds the usage and interpretation of symbols that are helpful in communication between individuals. In addition to that, it studies the way individuals create their impressions and thus maintain themselves in a society. As an individual experiences differently in any situation, this creates various interactions that finally results in the shape and meaning to life (Mack and Young, 1968). As a result, it broadens the idea of how everyone understands each other. According to the theory, people interpret the meaning of their world and life by using symbols, face-to-face interactions, verbal conversations, and bodily behaviors. It describes the social processes that a human creates by interaction such as cooperation or conflict. For example, when an individual moves to the business then he goes with the knowledge of what he studied in books and raw information. However, he only gets real experience when he practically works with an organization and then comes to know about various facts, workings, application in a true sense. By working and interacting, he can allow a practical adaption. Furthermore, he interacts directly and symbolically by a common language (verbal or non-verbal) and learns new things, gets experiences, developing with experts.
The Power of Corporations and Developing Concern
Big corporations are no doubt a great source for the economy to provide plentiful jobs, high quality products, lower prices, and high income. The largest multinationals and giants are located mostly in developing countries such as India, China, Mexico, Malaysia, and Brazil. ExxonMobil, Wal-Mart, BP, General Motors, Fortis are some of the largest corporations that compete well in a global economy and provide the required products and services according to the suit of economies. They play a vital role in the economic expansion and development at their base and other countries. Large corporations act as legal entities and have certain rights and obligations to fulfill towards their stakeholders (Roach, 2007). As they operate in a global environment, they have to compete effectively in market places, getting corporate power in terms of society, economy, law, culture, and politics.
However, corporate power also proves to be negative for the society. They may exploit the overall society by creating a monopoly or the employees who are exploited by excessive work and few rewards. As people are compelled to buy the products and services from such big corporations, they may pay higher prices too. They damage the natural environment by their operations and dominate the process of public policy (by political contributions and lobbying). Furthermore, corporate power also hinders the competition, as small businesses are unlikely to come and make their strong and stable places in markets when already they are being operated by giants. They operate in a way that their goals and those of society hardly align. As they can easily lobby the tax burden and can change the laws related to tax, they pay lower taxes. Furthermore, the increasing concept of service-oriented jobs is lessening the concept of labor union, making corporations even stronger. They have the power to influence government by providing political donations and getting their taxes lower even after enjoying huge profits.
In addition to that, they also have the power of international mobility through which they can easily transfer their resources across national borders. They can seek new contractors and relocate production where they feel more advantage.
However, bigger corporations as mentioned above play a positive role in helping to boost the economy. They have also been realizing the facts that the failure to serve society and environment may lead them to bear huge costs.
Cohen, Gerald A. (2000). Karl Marx's theory of history: a defence. Oxford University Press.
Gane, Mike J., ed. (2002) Radical Sociology of Durkheim and Mauss. Routledge.
Mack, Raymond W., and Kimball Young. "Sociology & social life." (1968).
Roach, Brian. (2007). Corporate Power in a Global Economy. Global Development And Environment Institute, Tufts University, Medford.
Tolentino, Paz Estrella. (2013) Multinational corporations: Emergence and evolution. Routledge.