Corporations: An American History

1
Corporations An
American History

• Mike Brigner
• Bus. Orgs. I PAR 201

2
Resources

• R.C. Chapter 1701
• More resources
• Text, pp. 193 to 196
• My.Sinclair External Links

3
American Revolution

• Colonists wanted to be free of ALL types of
  oppression
• Governmental (King George III)
• Corporate (British East India Company, Hudson Bay
  Company)
• Or otherwise
• And to replace oppression with democratic
  self-government

4
Early American Citizens

• Were anti-corporate as well as anti-crown
• Worried corporations would use money to buy
  elections, legislators, judges
• Concerned corps would monopolize markets and
  control crop prices
• Feared corps would turn industrial and craft
  workers into a commodity treat them as much
  an article of commerce as woolens, cotton or
  yarn.

5
Thomas Jefferson

• Spoke of the need
• To crush in its birth the aristocracy of our
  moneyed corporations.

6
First 100 Years (1750-1850)

• Corporate charters required approval of state
  legislatures
• Usually required 2/3 majority
• Few charters were awarded
• Most corps were limited in their functions, how
  they operated, how much money they could
  accumulate, and how long they could exist

7
After Civil War

• Rise of the Robber Barons
• Full scale assault on such rules
• Railroad baron Cornelius Vanderbilt
• What do I care about the law? Haint I got the
  power?

8
Next Century (1850-1950)

• Corporate powers used their financial might to
  win favorable charters in state capitals
• Wisconsin Chief Justice said, in 1873 A new and
  dark power is looming, he warned
• The enterprises of the country are aggregating
  vast corporate combinations of unexampled
  capital, marching, not for economical conquests
  only, but for political power.

9
As Recently As 1950s, Some States Imposed Strict
Charter Conditions

• Mgt s/h could be liable for corp acts!
• Corps could not own other corps
• Could own real estate only if necessary
• Felony to make any political contribution
• Charters limited to specific period of time
• All records open to state inspection
• Charter could be revoked for any/no reason

10
Todays Public Regulation of Corporations

• State-by-State, so states compete Who can offer
  most favorable terms for corps
• Favorable terms include
• Tax abatements
• Environmental compromises
• Tax contributions to construction
• Publicly-acquired real estate
• Insulation from litigation

11
Todays Public Regulation, contd

• Cities Counties get into the bidding wars
• For jobs
• For future tax revenues
• For sports franchises
• For new plants
• For new facilities
• For new development
• For new investment

12
Todays Public Regulation, contd

• For these benefits, taxpayers must pay
• Direct grants
• Future tax breaks
• Development costs
• Roads, water, sewer, waste disposal, etc.
• Environmental harms
• Environmental cleanup
• Supporting unemployed

13
Corporate Haven

• Go to
• http//en.wikipedia.org/wiki/Corporate_haven

14
Corporate Welfare

• Go to
• http//en.wikipedia.org/wiki/Corporate_welfare
• Question
• Is corporate welfare an effective way to increase
  corporate employment and benefit the public
  interest?

15
Corporate WelfarePhiladelphia Inquirer Series,
June, 1995

• Welfare received (1990-94) Employment
• GM 110,600,000 -104,000
• IBM 58,000,000 -100,000
• ATT 35,000,000 -1,077
• GE 25,400,000 -80,000
• Amoco 23,600,000 -8,300
• DuPont 15,200,000 -29,961
• Motorola 15,100,000 9,600
• Citicorp 9,600,000 -15,700
• ATT laid off 40,000 shortly after this report

16
Corporate Responsibility

• Is sole role of corporate management to make as
  much money as possible for the shareholders?
• Or does corporation have responsibility to
  promote a healthy community environment for
  all stakeholders?

17
Corporate Responsibility

• If shareholder profit is only goal of business,
  we create an encouragement to cut corners,
  exploit workers public interests
• And corporation has zero responsibility to
• Workers -- Community -- Environment
• Consumers -- State -- Nation

18
The Corporate Scene

• 800,000 new corporations a year
• 10 failure rate
• Corporations exist separately from members
• Death, bankruptcy, etc. doesnt affect existence
• Exists as a legal person
• Root word corpus is Latin for body
• Taxed separately on its earnings

19
Corporate Purpose

• R.C. 1701.03 Purposes of corporation
• (A) A corporation may be formed under this
  chapter for any purpose or combination of
  purposes for which individuals lawfully may
  associate themselves

• R.C. 1701(B)(2)
• The purpose for which any corporation is formed
  is to engage in any lawful act or activity for
  which a corporation may be formed under this
  chapter
• Corp Powers See text, pp 181-182

20
Types of Corporations

• See Text, pp 182 --185

21
Advantages/Disadvantages

• ADVANTAGES
• Limited liability
• Corporate deductions
• Continuity of existence
• Transferability of ownership by stock shares

• DISADVANTAGES
• Double taxation
• Avoidance Read Text pp 187-189
• Costly formalities of formation operation
• Centralized management, so little personal
  control for most owners

22
Corporate Taxation

• Corporations are persons get all benefits of
  citizens
• Plus grants, tax breaks powerful voice in
  government
• If we would end Double Taxation, should we also
  end Double Benefits Double Representation?
• Reality Many corporations pay ZERO taxes

23
Corporate Taxes

• Go to Bus. Orgs. I External Links
• Read Corporate Taxes Melting Away

24
Corporate Taxes

• September 2004 study
• 275 companies on the Fortune 500 list
• ALL reported profits in 2001, 2003 and 2003
• Collectively 102 billion pretax U.S. profits
• 82 of the companies paid NO income tax in at
  least one of the years
• PLUS, together these 82 firms collected 12.6
  billion in tax rebates over the three- year
  period.

25
Corporate Taxes

• September 2004 study, contd
• Stated U.S. corporate tax rate is 35
• Of the 275 firms studied, tax breaks helped the
  entire group of 275 firms to reduce their
  effective tax rate
• From 21.4 percent in 2001
• To 17.2 percent in 2003
• 2002 tax bill was for Economic stimulus
• But business capital investment by the 275
  companies studied fell 15 from 2001 to 2003

26
Corporate Taxes

• Stanford law professor Joseph Bankman,
• an expert on business taxes says
• Corporate income taxes have been on a long, slow
  decline, for reasons including
• Big firms have taken aggressive advantage of tax
  laws
• Legislation that reduced corporate taxes in order
  to reward investment and job creation
• Bankman says the debate over corporate income
  taxes should consider how tax policies affect the
  federal deficit
• "Given our current huge deficit, we're replacing
  taxes with debt,'' Bankman said, adding that when
  the debt comes due, today's tax cuts are "a tax
  on our children.''

27
Corporatism(Corporate Political Influence)

• Historically, corporatism is a political system
  in which legislative power is given to
  corporations that represent economic, industrial,
  and professional groups.
• Today, corporatism is used in reference to
  tendencies in politics for legislators and
  administrations to be influenced or dominated by
  the interests of business enterprises.
• In this view, government decisions are seen as
  being influenced strongly by which sorts of
  policies will lead to greater profits for favored
  companies.

28
Corporatism(Corporate Political Influence)

• Fascism should more properly be called
  corporatism because it is the merger of state and
  corporate power.
• --Benito Mussolini

29
Corporate Representation Without Corporate
Taxation

• If U.S. would eliminate double taxation
• If U.S. further cuts corporate taxation
• If corporations can find ways on their own to
  avoid taxation
• THEN, should corporations get double benefits?
• Representation/influence in government
• Taxpayer-funded grants
• Government benefits

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Corporations An American History

• Concluded
• Mike Brigner