The Changing Shape of Corporations

Posted by | April 25, 2012

For nearly 30 years, Portfolio 21 Investments has been working to influence progressive corporate behavior through the investment process. Recently, Bill Clark, a corporate governance attorney who also has a master’s degree in theology, was in Portland, OR speaking about corporate governance within the context of sustainable business. I’ll share some of Bill’s thoughts as well as my own on how corporations ended up with the power they have today and how the definition of the corporation is evolving.

The corporation came to us from the monarchies of medieval times.  Monarchs were the conscience of the corporation and could revoke a corporate charter. The oldest existing corporation is Stora Enso, a Scandinavian basic materials company, started in 1288. Corporations were a catalyst to the expansion of European colonialism from the 1400s to 1700s. At one time the Hudson’s Bay Company controlled 15% of the North American landmass.

In the 18th century, the authority to charter corporations was passed from monarchies to legislative and administrative bodies. However, a corporate charter could still be revoked if the corporation failed to meet the needs of the sovereign.

The United States inherited the concept of a corporation in 1776. The authors of our Constitution feared the power of corporations. Corporate law was designed to protect the public interest rather than the interests of shareholders. At that time corporate charters were closely regulated by the states and were seen as the external conscience of corporations. Beginning in the 19th century, the states’ ability to revoke charters was limited, which granted corporations more power. Limited liability for officers, directors, and shareholders was adopted. The business of corporations became to maximize wealth for shareholders through unlimited growth. As we continually see today, this objective often comes at the expense of employees, community, and the environment.

Today there are new choices in corporate governance from benefit corporations to an L3C which is a hybrid for profit/non profit. To learn more about these innovative new corporate structures, see “The Rise of the Charitable For-Profit Entity” by Evangeline Gomez in the January issue of Forbes.

 

Carsten is Portfolio 21 Investments' founder and Chief Executive Officer. He has more than 25 years of experience in socially and environmentally responsible investing.

Post categories: corporate governance, growth, regulations

Add your comment:

Thanks very much for leaving a comment.

Notice

I understand and would like to proceed. »