The Corporate Environment William J. Frey College

Transcript:The Corporate Environment William J. Frey College:
The Corporate Environment William J. Frey College of Business Administration University of Puerto Rico at Mayaguez Some sources Stone, C. D. (1975) Where the Law Ends: The Social Control of Corporate Behavior. Prospect Heights, IL: Waveland Press, INC: 1-30. (History of Corporation) French, P.A. (1984) Collective and Corporate Responsibility. New York: Columbia University Press. (Corporate Responsibility based on CIDS) Fisse, B. and French, P.A., eds. (1985) Corrigible Corporations and Unruly Law. San Antonio, TX: Trinity University Press. (Corporate Punishment) P.T. Leeson. (2009). The Invisible Hook: The Hidden Economics of Pirates. Princeton: Princeton University Press: 44-81. (Pirate Articles of Agreement) Terms from History of Corporation Property Des Jardins (a business ethicist) characterizes property, not as a single right, but as a “bundle of associated rights.” These include the right to “possess, control, use, benefit from, dispose of, and exclude others” from one’s property Ultra Vires Literally “beyond the power”. If a corporate charter designates something as “ultra vires” in relation to the corporation, it literally means that this action goes beyond the legitimate powers of the corporation. Implied Powers If a company knows of an activity (or should know of it) and still permits the activity to continue, then its consent is implied and the power to perform the action implied. Joint stock company 17th and 18th centuries in Great Britain. Companies were formed to carry out complex business activities. Investors put their money into the venture and managers oversaw the activities. Joint Stock Companies produced problems because of unlimited liability Corporate shield The corporate shield protects investors by distributing financial risk. Investor liability limited to amount of investment. Agency and Charters Law of Agency Responsibility of agents to remain faithful to the interests of principals Principal Originate action and determine its goal. Delegate executive authority to agent if unable to execute action working alone Agent Carries out or completes action originated by another. Responsible to principal to remain faithful to the principal’s goals and interests Corporate Charter Founding document of corporation Originally the charter was a device of corporate control because it outlined what the corporation could and could not do. If not permitted by charter it was ultra vires (=beyond the power). Charter Mongering Charters allow incorporation for all legal activities. Charter no longer defines boundaries for legitimate and illegitimate corporate activities Corporate legal and moral responsibility Corporation Internal Decision Structure or CIDS Corporate goals, decision recognition rules, roles,