Corporation

A corporation is a legal entity (technically, a juristic person) which has a separate legal personality from its members.The defining legal rights and obligations of the corporation are: the ability to sue and be sued;the ability to hold assets in its own name; the ability to hire agents; the ability to sign contracts; andthe ability to make by-laws, which govern its internal affairs.Other legal rights and obligations may be assigned to the corporation by governments or courts. These are often controversial. Stewart Kyd, the author of the first treatise on corporate law in English, defined a corporation as "a collection of many individuals united into one body, under a special denomination, having perpetual succession under an artificial form, and vested, by policy of the law, with the capacity of acting, in several respects, as an individual, particularly of taking and granting property, of contracting obligations, and of suing and being sued, of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the design of its institution, or the powers conferred upon it, either at the time of its creation, or at any subsequent period of its existence." Currently, the modern business corporation is the dominant type of corporation. In addition to its legal personality, the modern business corporation has at least three other legal characteristics:transferable shares (shareholders can change without affecting its status as a legal entity), perpetual succession capacity its possible continued existence despite shareholders' death or withdrawal, and limited liability (including, but not limited to: the shareholders' limited responsibility for corporate debt, insulation from judgments against the corporation, shareholders' amnesty from criminal actions of the corporation, and, in some jurisdictions, limited liability for corporate officers and directors from criminal acts by the corporation). The modern business corporation's prevalence often obscures the fact that for years other corporate business entities existed, before the emergence of the modern business corporation. Investors and entrepreneurs often form joint stock companies and then incorporated them to facilitate conducting business; as this business entity now is prevalent, the term corporation often is used to specifically refer to such business corporations. Corporations may also be formed for local government (municipal corporation), political, religious, and charitable purposes (not-for-profit corporation), or for government programs (government-owned corporation). As a generic legal term, 'corporation' means any group of persons with a legal personality. Historically, the modern business corporation emerged from the blending of the traditional corporation with the joint-stock company

Types of corporations Most corporations are registered with the local jurisdiction as either a stock corporation or a non-stock corporation. Stock corporations sell stock to generate capital. A stock corporation is generally a for-profit corporation. A non-stock corporation does not have stockholders, but may have members who have voting rights in the corporation For-profit and non-profit In modern economic systems, conventions of corporate governance commonly appear in a wide variety of business and non-profit activities. Though the laws governing these creatures of statute often differ, the courts often interpret provisions of the law that apply to profit-making enterprises in the same manner (or in a similar manner) when applying principles to non-profit organizations as the underlying structures of these two types of entity often resemble each other. Closely held and public The institution most often referenced by the word "corporation" is a public or publicly traded corporation, the shares of which are traded on a public market (e.g., the New York Stock Exchange or Nasdaq) designed specifically for the buying and selling of shares of stock of corporations by and to the general public. Most of the largest businesses in the world are publicly traded corporations. However, the majority of corporations are said to be closely held, privately held or close corporations, meaning that no ready market exists for the trading of shares. Many such corporations are owned and managed by a small group of businesspeople or companies, although the size of such a corporation can be as vast as the largest public corporations. Closely held corporations have a few advantages over publicly traded corporations. A small, closely held company can often make company changing decisions much more rapidly than a publicly traded company. A publicly traded company is also at the mercy of the market, having capital flow in and out based not only on what the company is doing but the market and even what the competitors are up too. Publicly traded companies also have advantages over their closely held counterparts. Publicly traded companies often have more working capital and can delegate debt throughout all shareholders. This means that people invested in a publicly traded company will each take a much smaller hit to their own capital as opposed to those involved with a closely held corporation. Publicly traded companies though suffer from this exact advantage. A small corporation can often voluntarily take a hit to profit with little to no repercussions (as long as it is not a sustained loss). A publicly traded company though often comes under extreme scrutiny if profit and growth are not evident to stock holders, thus stock

holders may sell, further damaging the company. Oftentimes this blow is enough to make a small public company fail. Oftentimes communities benefit from a closely held company more so than from a public company. A closely held company is far more likely to stay in a single place that has treated them well, even if going through hard times. The shareholders can incur some of the damage the company may receive from a bad year or slow period in the company profits. Workers benefit in that closely held companies often have a better relationship with workers. In larger, publicly traded companies, often when a year has gone badly the first area to feel the effects are the work force with lay offs or worker hours, wages or benefits being cut. Again, in a closely held business the shareholders can incur this profit damage rather than passing it to the workers. Closely held businesses are also often known to be more socially responsible than publicly traded companies. The affairs of publicly traded and closely held corporations are similar in many respects. The main difference in most countries is that publicly traded corporations have the burden of complying with additional securities laws, which (especially in the U.S.) may require additional periodic disclosure (with more stringent requirements), stricter corporate governance standards, and additional procedural obligations in connection with major corporate transactions (e.g. mergers) or events (e.g. elections of directors). Mutual Benefit Corporations A mutual benefit nonprofit corporation is formed solely for the benefit of its members. An example of a mutual benefit nonprofit corporation is a golf club. Individuals pay to join the club, memberships may be bought and sold, and any property owned by the club is distributed to its members if the club dissolves. The club can decide, in its corporate bylaws, how many members to have, and who can be a member. Generally, while it is a nonprofit corporation, a mutual benefit corporation is not a charity. Because it is not a charity, a mutual benefit nonprofit corporation cannot obtain 501status. If there is a dispute as to how a mutual benefit nonprofit corporation is being operated, it is up to the members to resolve the dispute since the corporation exists to solely serve the needs of its membership and not the general public. Multinational corporations Following on the success of the corporate model at a national level, many corporations have become transnational or multinational corporations: growing beyond national boundaries to attain sometimes remarkable positions of power and influence in the process of globalizing.

The typical "transnational" or "multinational" may fit into a web of overlapping shareholders and directorships, with multiple branches and lines in different regions, many such sub-groupings comprising corporations in their own right. Growth by expansion may favor national or regional branches; growth by acquisition or merger can result in a plethora of groupings scattered around and/or spanning the globe, with structures and names which do not always make clear the structures of shareholder ownership and interaction. In the spread of corporations across multiple continents, the importance of corporate culture has grown as a unifying factor and a counterweight to local national sensibilities and cultural awareness Criticisms Adam Smith in the Wealth of Nations criticized the joint-stock company corporate form because of the separation of ownership and management.The directors of such [jointstock] companies, however, being the managers rather of other peoples money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own.... Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. The context for Adam Smiths term for companies in the Wealth of Nations was the joint-stock company. In the 18th century, the joint-stock company was a distinct entity created by the King of England as Royal Charter trading companies. These entities were awarded legal monopoly in designated regions of the world. See Wikipedia cited example of the British East India Company. Furthermore the context of the quote points to the complications inherent in chartered joint-stock companies. Each company had a Courts of Governors and day-to-day duties were overseen by local managers. Governor supervision of day-to-day operations was minimal and was exacerbated by the geography of the 18th century. The sailing time from India to England was many months and round trip routes often took a year or longer. It was during the interim time period that local managers took advantage of the time delay by plundering the local population at the expense of the interests of shareholders. Bribery and corruption were inherent in this type of corporate model as the local managers sought to avoid close supervision by the Courts of Governors, politicians, and Prime Ministers. In these circumstances, Smith did not consider joint-stock company governance to be honest.

Legal Scholar and Professor of Law at the University of British Columbia Joel Bakan describes the modern corporate entity as 'an institutional psychopath' and a 'psychopathic creature.' In his documentary The Corporation, Bakan claims that corporations, when considered as natural living persons, exhibit the traits of antisocial personality disorder or psychopathy. Also in the film, Robert Monks, a former GOP candidate for Senate from Maine, claims that:"The corporation is an externalizing machine (moving its operating costs to external organizations and people), in the same way that a shark is a killing machine." Noam Chomsky, the MIT linguist and activist, describes the corporate structure as being fascist:A corporation or an industry is, if we were to think of it in political terms, fascist; that is, it has tight control at the top and strict obedience has to be established at every level there's a little bargaining, a little give and take, but the line of authority is perfectly straightforward.... I'd love to see centralized power eliminated, whether it's the state or the economy, and have it diffused and ultimately under direct control of the participants.Chomsky has also criticized the legal decisions that led to the creation of the modern corporation:Corporations, which previously had been considered artificial entities with no rights, were accorded all the rights of persons, and far more, since they are "immortal persons", and "persons" of extraordinary wealth and power. Furthermore, they were no longer bound to the specific purposes designated by State charter, but could act as they choose, with few constraints.

UNIVERSITATEA LUCIAN BLAGA SIBIU FACULTATEA DE STIINTE ECONOMICE

CORPORATION

STUDENT: FINANTE BANCI ANUL II