Inštitut za ekonomsko demokracijo

History of the concept of a corporation and the many fallacies

History of the concept of a corporation and the many fallacies

There are many fallacies involved in the contemporary “corporate governance debate”, even today. To better understand how these misconceptions came about, it is important to take a look at the history of the concept of the corporation.

History of the concept of a corporation and the many fallacies

In the Middle Ages, corporations were based on treating as a separate legal party an association of people involved in some common activity as in a university, monastery, guild, or borough. Over the course of centuries, this associative element was squeezed out as the people carrying out the joint activity, particularly in a business entity, became employees rather than the members of the corporation.

Then the membership rights were detached from participating in the joint activity and became free-floating property rights that could be freely bought and sold. Thus, the corporation went from being the legal embodiment of joint human activity to being just an aggregation of material resources that could be bought and sold.

Today, the concept of employee ownership returns corporations to their original role since the people working in the company become the members of the company. Hence, the employee-owned company is not some new exotic type of company; it is a return to the original conception of the legal embodiment of people jointly carrying out some activity and democratically governing their own activity.

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