In a series of articles, the Hawai’i Island Chamber of Commerce will provide some background information meant to help us understand and appreciate the mechanisms that keep our markets operating efficiently for the good of our community. ADVERTISING In a
In a series of articles, the Hawai’i Island Chamber of Commerce will provide some background information meant to help us understand and appreciate the mechanisms that keep our markets operating efficiently for the good of our community.
It is common for the Nobel Prizes in physiology and medicine, chemistry, and physics, and the Nobel Memorial Prize in economics, to be awarded to university professors. Rarely do these awards go to members of the corporate world. While universities have an excellent record of research and discoveries, the benefit to mankind comes primarily from business applications and innovations. It would be fair to state that in our times, business activity is at the heart of human activity and advancement.
Any modern society is constituted of five basic categories of institutions. All examples of institutions may be classified under one of these five categories: family, government, church, academe, and corporation. Families have existed in various cultures, in one form or another, through pre-recorded history. So have governments, whether as dictatorships, or monarchies, or democracies; as local, feudal, regional, national, or supra-national, etc.
Church has existed in all parts of the world, again since pre-recorded history. So has the academe, in various forms of learning organizations and communities. The institution of corporation, however, is the youngest of the five.
The origin of the modern corporation can be attributed to the Romans who developed organizations in the 9th and 10th centuries called ‘societas maris,’ or maritime firms. They organized business’ organizational structure in terms of ‘partner on land’ and ‘partner at sea,’ effectively separating capital from labor.
However, corporations as we know them today, as those that issue stocks and bonds, are about four centuries old. The East India Company, founded in 1601, late in the reign of Queen Elizabeth I, quickly demonstrated the ability of corporations to affect social change. The Amsterdam stock exchange was founded in 1602 to establish the Dutch East India Company and to enable buying and selling of shares in volume through free speculative transactions.
The emergence of stock markets enabled buyers and sellers to transfer their shares of ownership in companies anonymously, without direct participation in business operations or governance.
Initially corporations engaged in trade. However, by the time the Bubble Act was passed by the British Parliament in 1720, goods transported from India by the East India Company already accounted for 15 percent of all British imports.
By late nineteenth century, corporations were engaged in large-scale manufacturing. Mass production saw corresponding increase in consumption. Businesses diversified from manufacturing into various functional areas such as marketing, financing, accounting, and other essential areas of professional practice. Corporations became too large for one person to manage. This saw the emergence of professionally educated and trained managers, with specialized competencies in a range of business functions. Societies developed corporate laws, granting limited liability to corporate share-owners.
Through mergers and acquisitions, single-product, single-function companies evolved into multi-product, multi-function organizations.
Today, corporations have become conglomerates that cross industrial boundaries: companies manufacturing electrical machineries diversify into making household appliances; manufacturers of automobiles make refrigerators; meat packers use their byproducts to manufacture soap; and drug manufacturers sell household cleaning chemicals.
This evolution of the institution of corporation has led to remarkable strides in the betterment of human condition.
The world over, corporate institutions have shaped human experience and history. In the United States, it has shaped the American way of life, enhanced the possibilities of individual freedom, and advanced the prospects for the pursuit of happiness.
In such endeavors as the establishment of Jamestown as a major center of export, illumination to dispel the darkness of the night, defiance of gravity to fly through air and space, production of food and shelter, improvement of health, preservation and extension of life, and undertaking of numerous other heroic challenges, the corporate institution has taken center stage.
Plato had called for societies to be ruled by philosopher-kings.
Today, business leaders are rightly described as modern philosophers, who decentralize the political power of governance and shape the course of societies.
