Notes from “The Company: A Short History of a Revolutionary Idea”

The Company (bookcover)The Company: A Short History of a Revolutionary Idea
by John Micklethwait & Adrian Wooldridge

Some notes I took while reading this highly informative book.  Presented in roughly chronological order (book chronology) though I make no promises…

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Gilbert & Sullivan operetta, UTOPIA LIMITED

satirizes the limited liability corporation, and Joint Stock Act
http://en.wikipedia.org/wiki/Utopia,_Limited

“This is a government of the people, by the people, and for the people no longer. It is a government of corporations, by corporations, and for corporations.”

— U.S. President Rutherford B. Hayes

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the Limited Liability Joint Stock Company

  1. is an artificial person, with the same ability to do business as a real person
  2. it can issue tradable shares to any number of investors
  3. those investors have limited liability, so they can lose only the money they committed to the firm

Big changes Victorian England made to companies (Joint Stock Act, I think):

  • Need 7 people to come together to draw up papers to form company
  • Must use word “Limited” so creditors know is limited liability

The Agency Problem:
Potential conflict of interest between the principles who own shares in the company (shareholders) and their agents who run it

[Which is why YES, the Managers—the “agents” mentioned above—should be the sixth group in our show]

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VA and MA both started at COMPANIES (Virginia Company, Massachusetts Bay Company)

And then at some point in the 18th c. their boards of directors decided to transform the companies into Commonwealths

Thereby transforming the shareholders of the company into citizens of the newly-formed state

[fascinating in terms of the relationship between democracy, capitalism, and the corporation in American history.  Not sure what, if anything, to do with it for the show…]

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Higher ed

In America, some of the earliest corporations created were those formed to found Universities
The Harvard Corporation is America’s oldest extant corporation

Supreme Court case involving Dartmouth College is what set, under US law, the individual-ness of corporations
(that they are artificial people, have rights accordingly under the Constitution)
[see also the more recent Citizens United case for a continuation of this, very controvertial]

Trustees of Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518 (1819), was a landmark United States Supreme Court case dealing with the application of the Contract Clause of the United States Constitution to private corporations. The case arose when the president of Dartmouth College was deposed by its trustees, leading to the New Hampshire legislature attempting to force the college to become a public institution and thereby place the ability to appoint trustees in the hands of the governor. The Supreme Court upheld the sanctity of the original charter of the college, which pre-dated the creation of the State. The decision settled the nature of public versus private charters and resulted in the rise of the American business corporation.

from Wikipedia

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Language

After joint stock act of 185x in England, companies are referred to as “Little Republics

French word for company is Societe Anonime

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The Protestant Ethic and the Spirit of Capitalism
Max Weber writing about the links between the development of the company and the Protestant work ethic, how those two ideas have been tied together historically

(as opposed / in response to Marxist dialectical materialism and laying capitalism at the feet of the Catholics)

http://en.wikipedia.org/wiki/The_Protestant_Ethic_and_the_Spirit_of_Capitalism

many of Victorian Englands earliest companies were Quaker founded
their corporate acts were debated in meetings and defended to the whole (Quaker) community

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Two different models for corporate responsibility:

1) STAKEHOLDER MODEL

says company is responsible to a wider range of interests, wider variety of social responsibilities, part of the social contract just like human beings.  This model has most ideal form in Germany, but also generally in continental Europe; and in Japan.

2) SHAREHOLDER MODEL

Anglo-Saxon model of England and America.  Says company is SOLELY responsible to its shareholders, to those who hold stock in the company.

[This conflict could be something that is interesting to explore in our different stories told about our fictional company]

Not QUITE as clear cut as all that of course…

Shareholder / Anglo-Saxon model is the whole “company is a person with no soul”, the heartless company.
this model, however, has still been socially responsible (see Weber).

American “Robber Barons”:

  • responsible for building most of our public education and health systems
  • responsible to their workers in the form of establishing pensions, insurance, company housing
  • spirit of philanthropy in that age continues today (Bill & Melinda Gates Foundation, Warren Buffett, etc)
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  1. […] of the company in terms of industry and what it manufactures.  This was mentioned in M&W book early on as something very distinct to American companies vs British, the flexibility of the […]

  2. […] I’ll repost that quote from the earlier post about this book, just to keep themes together: This is a government of the people, by the people, and for the […]



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