Establishing a precise date for the beginning of the corporate form of doing business is subject to considerable debate. There are vestiges of businesses that operated as a continuous organization with changing memberships dating from ancient times. Both the Greek and Roman civilizations had businesses and groups that functioned in this manner but the true development of the corporate form as we know it today began to take hold in the Middle Ages. First, the Church, as the era's dominant institution, began recognizing non-business forms of corporations for ecclesiastical purposes. As the world began emerging from the isolation of the Middle Ages and trade began to increase a need for different forms of business organization became more necessary. With the discovery of the New World and the accompanying increase in costs, it became impossible for sole proprietors and partnerships to afford the costs of international trade and the corresponding risk of liability. This reality, plus other considerations, provided an impetus for the use of the corporate form. In England, which eventually came to dominate international markets, the corporation began to develop as a legally recognized form of business organization.
An important consideration in the development of the corporation in Britain and the rest of Europe was that they did not develop as independent entities separate from the government. Corporate existence in Europe occurred as a right granted by the state and not as a separate legal entity. In the United States the situation was much different and this factor would eventually cause corporations to develop much differently in the United States. Corporations in the United States were able to develop more freely and creatively.
In the United States, the corporate form of business was passed down through English common law but took on increased importance and prominence during the advent of the Industrial Revolution. Manufacturing firms, with their substantial capitalization costs and high liability risks, were the perfect fit for the corporate form of business and quickly became the business form of choice. As the corporate form became more popular, state governments in the United States began to enact legislation governing the operation of corporations with each jurisdiction adopting its own specific requirements (Micklethwait, 2005).
2. What is the difference between the British and European corporation and the U.S. corporation? What does Dr. Novak feel is the result of the difference?
The essential difference between the British and European corporation and those formed in the United States was in the method that they were created. In Britain and the European continent, the corporate form of business arose out of business' relationship with the monarchies. Unlike the United States, where corporations developed largely without the presence of any monarchial form of government, Britain and the other European nations developed economically while monarchies were in power. As a result, in order for corporations to exist they had to seek such organization rights from the monarchy. Operating a business as a corporation in Europe became to be looked upon as a right and not merely the result of filing the necessary documents in a government office. In the United States, meanwhile, corporations were created through filing documents and there was no rights conferred by a monarchy. Becoming a corporation was not a right but merely a formality. In Europe, the continued existence of a corporation was a function of the corporation's relationship with the ruling monarchy. In the United States, the continued existence of the corporation was a function of the corporation's ability to satisfy its customers (Forbes, 1986). In the United States, the corporation was independent of the state and provided the corporation with an ability to develop and be creative in its operation and direction. According to Dr. Novak, this freedom from state control allowed the American corporation the flexibility to develop and grow in areas that was not possible under the European system (Maier, 1993).
3. What are the two definitions of stakeholders?
Dr. Novak describes two different types of stakeholders. The first type of stakeholder is the one that establishes ownership over a piece of property such as the settlers that moved West in the early years of the American republic. These stakeholders, Novak argues, were an important part of the American experience because they ensured that the country would develop…