What Makes The Corporation So Special?

1933 WordsNov 18, 20148 Pages
The modern corporation is a marvel to behold and is one of the most fascinating inventions by man. What makes the corporation so special is that it allows for the risk of a business venture to be spread and cooperatively held. In contrast, prior to the formation of corporations, the risks of business ventures were shared among a few individuals. However, what corporations have achieved that partnerships could not is immense size due to increases of capital. As mentioned previously, the corporation allows for distribution of risks among its stockholders. Furthermore, management and ownership are separated under the corporate structure. The notion of a separation between management and ownership allows for the corporation to put into the…show more content…
Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.” (WN, 233) Smith believes that because the directors of the company do not have their own fortunes at stake, they are less likely to be anxious regarding the performance of the firm. This is mostly attributed to the nature of joint-stock companies, in which the pool of risk is transferred among a larger portion of individuals where as in private companies (or co-partners for Smith) the risk lies on several individuals. Additionally, Smith intuited that all joint stock companies were likely to fail if they were not supported by state monopolies: Without a monopoly, however, a joint stock company, it would appear from experience, cannot long carry on any branch of foreign trade. To buy in one market, in order to sell, with profit, in another, when there are many competitors in both; to watch over, not only the occasional variations in the demand, but the much greater and more frequent variations in the competition, or in the supply which that demand is likely to get from
Open Document