WHO HAS MORE POWER: GOVERNMENT OR CORPORATIONS?

The article introduces the corporation's concept and its powers; it also attempts to further deliberate on the corporation's governmental control. While comparing both their powers, it was found that the corporations hold significant power and control in the current economic and political scenario.
Estimated Reading Time: 10 minutes

Introduction

Who runs the world? Government or the Corporations. A corporation is an organization formed with state governmental approval to act as an artificial person to carry on business, which can sue or be sued, and issue shares of stock to raise funds to start a business or increase its capital. Whereas the government is a group of people with authority to exercise political, social or economic actions over the people and perform certain functions for the people by governing the administration. Both have significant powers; however, while answering the question, Who has more power? People would probably think the government is supreme as it wields power form the State.

The current economic environment reveals that corporations procure more revenue than the government. Its global expansion and diversification seem to put state power back and has taken over the country on a geopolitical scale. And even in some countries, governments remain at the back and call-witness for the consistent growth and success of corporations. A study conducted by the authors of Univesity of Amsterdam, where they compared and evaluated the positioning of corporations and states based on their revenue generation, revealed that; States occupy the top rankings, with the US first followed by China Japan. But it was also found that plenty of corporations are on par with some of the world’s largest economies: Walmart corporation exceeded Spain and Australia. These conditions suggest that it is still difficult to convince people that the government holds power over corporations.

What is a Corporation?

A corporation is a group of persons who are deemed in law to be a single legal entity. The corporate entity is legally distinct from its members; it has a legal personality and can hold property, sue and be sued in its name as if it were a natural person. A corporation is created by incorporating it as a legal entity; its process for existence varies in each State and the kind of business it operates. Corporations abound in the economy ranging from a small family business or partnership firms to giant multinational corporations. They act as the face of the structural framework of modern industrial society.

The evolution of corporations is dated to ancient times; however, giant corporations are the English commercial revolution product. During the 17th and 18th centuries, the body corporate was brought to existence either by the Royal Charter or by particular Parliamentary enactment. As the methods were costly and dilatory, and due to the growth of incorporation with multiple members and shareholders, the ownership was separated from management, giving rise to the board of directors. In initial times the educational and religious corporations were existing, giving more importance which was later expanded to specific fields of state-specific interests; these corporations were owned and managed by wealthy business people who negotiate, invest and share the profits. However, the 29th-century industrial revolution led to the diversification of business participation; the rapid growth in technologies paved the way for new incorporations. The current global scenario shows numerous national and multinational corporation spread across the globe.

Characteristics of Corporation

Perpetual succession: Corporation has an unlimited life span, as they represented through a human personality which can be transferred or inherited to another person, provides the corporation with a status of perpetual succession. Many members may come and go, but the company never dies.

Limited liability: The privilege of limited liability for the business debts is one of the primary advantages of a corporation; it provides the members with a guarantee of contributing nothing more than the nominal value of the shares held by them in the company stocks.

Separate legal recognition: Corporation hold an independent corporate existence; it is a distinct legal persona carrying its business trade and liabilities.  It is represented through a person; however, the corporation at law is separate from the shareholders and other members. It remains the same with independent legal recognition.

Governmental regulation: Corporations being a legal entity it is controlled and managed through governmental regulation. All the activities of the corporation performed internally and externally are regulated by the governmental policies, for example; incorporation rules, registration of company name, stock listing, corporate governance rules etc., these federal rules aimed at protecting the business environment and sustainable development goals

Transferring of shares: Corporations can facilitate easy transfer of ownership; as it has a separate legal recognition, the transfer of its shares is feasible. It enhances liquidity in the market and economic stability for the investors

Capital acquisition: Corporations acquire capital by selling ownership through stocks and bonds in the financial market. It gives the corporation a larger supply of funds with the help of a small number of individuals. The limited liability and ease of transferring ownership rights attract more investors for capital acquisition

Management and control: Corporation’s professional management is diversified in the hands of various stakeholders; to maintain a prudent development, their management and ownership are separated between the shareholders and the board of directors. The management of company affairs is done by managing directors and other executives.

Powers of Corporation

Express Powers

Express powers are derived from statutes, or charter, by-laws or through the corporation’s directors’ regulations through supreme legislation. These are absolute powers provided by law to the corporation, ascertained by particular regulations or general incorporation rules made by the legislation; these powers are conferred through the public law of the land or articles of association. The powers include:

  1. The right to sue can be sued in the name of the corporation
  2. To participate in the financial market to purchase, use and sell stocks and assets
  3. To enter into a contract with parties for the sake of business or trade
  4. To borrow money, issue notes and bonds, lend money, invest funds, make donations to the public welfare, and establish pension plans
  5. To determine corporate policy concerning dividends, services, prices, wages
  6. To fixes employee compensation, pension, retirement funds, and other schemes.
  7. To frame rules for capital investments
  8. To appoint directors and other executives and fill vacancies
  9. To propose and make amendments in articles of incorporation, mergers, asset sales, and dissolution.
  10. To join in partnerships, joint ventures, trusts, or other enterprises. 
  11. To authorize and distribute dividends to shareholders and other investors

Implied Powers

Implied powers are those powers conferred upon the corporation that is considered reasonably necessary to carry out the express powers or execute the business’s purpose. These powers act in the curse of business, embarking on protecting them from external forces. These powers are formed for various purposes such as;

  1. To protect the shareholders and the employees of the corporation
  2. To diversify and develop the business
  3. To enhance the capital formation and mobilization of funds
  4. To deal with the debts the corporations owed
  5. To regulate the stock trading

Inherent or Incidental Powers

Incidental or inherent powers are provided to the corporations for the mere fact of its being incorporated; the supreme legislation grants such powers under the principle of implied and incidental powers. In general, inherent powers are possessed under it is a corporation. This principle has been established in theAttorney General’s case. According to this principle, a company, in addition to the powers conferred on it by the objects clause of its memorandum, can do all those acts, which are:

  • Necessary for,
  • Incidental to,
  • Incidental to or consequential upon the exercise of those powers.

Thus, this principle is of implied and incidental powers. It clarifies that a company has the powers on it by the objects clause of its memorandum or the statute creating it and the powers necessary for an incidental to or consequential upon the authorities so conferred. For example, a company formed to buy and sell cotton, which can also purchase or hire trucks, carts and labours etc., because they are necessary to buy and sell cotton.

Government Power over Corporation

Albert J. Harno, in his article published in Yale Law Journal, described a corporation from the eyes of the government as; “A creature of the law-invisible, intangible, and existing only in contemplation of law? It is a group of individuals who have associated and organized themselves in a manner approved by the State utilizing which they may enjoy certain privileges appertaining to this form of organization.”

From the above statement, the author attempted to reveal that a corporation as an individual may do what the State permits it to do; they can create new legal obligations only as long as the state sanctions them; they possess their legal powers and privileges only through the grace of organized society and nobody is above the law. At any time, the government can restrict or extend the corporation’s legal capacity or its privileges and powers without being questioned. Under this view, a corporate entity is considered nothing more than a group of members possession priveledges granted by the State to do business; they are conferred with capacity and legal powers to create a new obligation for the State’s benefit and indirectly controlled by itself. When possessed by an individual, this standard control called power is enjoyed until it is interfered with by the government. However, from the State’s viewpoint, which imposes legal sanctions, it possesses more ability than the corporation.

Who Holds More Power: Corporation or the Government- The Contemporary Scenario

A corporation is a visible body united by a group of authorities working toward one objective. It is a separate entity in the eye of the law represented through a natural person. Though the government confers power through the legislature, creating a legal obligation, the actual exercise of power goes beyond the government’s control. In the current scenario, the global expansion in geopolitical nature is led by the corporations and no the government. The growth of technologies and industrial revolutions has created an upper hand for corporations wielding enormous power over the economy and politics. While comparing the powers of government and corporation studies suggests that government power no longer possesses an exclusive governing principle, corporations have evolved to be the largest revenue generators of the country

At the global level, the corporations hold a significant position in wielding power and corporate mobility; multinational corporations dominate international politics and economic functions than the governments. As state by Joseph Nyde in his article ‘Multinationals: The Games and the Rules: Multinational Corporations in World Politics.’

“As dramatic as the rise of the multinational corporation has been its increased political prominence.” While attracting inward investment from these new leviathans of the world economy brought benefits, many governments even then had come to fear this kind of economic takeover as their predecessors had been concerned about the military invasion.

Corporations affected economic development and have taken over political prominence through their diversification and business expansion. Their drive for trade and business and the unfettered capital flow have learned to get culturally adapted for the modern economic change. All these aspects reveal that more than governments, the corporations are said to possess more power and control;, the world is now a society that is governed or controlled by corporations.

Croporatocracy

Corporatocracy is a pejorative term used by the critics in the United States of America concerning their current economic situation where some corporation colonizes the global corporate society in the US; it generally refers to an economic and political system controlled by corporations or corporate personalities.

Author John Perkins has used the term in his book Confessions of an Economic Hit Man, where he described Corporatocracy as a collective composed of corporations, banks, and governments. This collective is known as what author C Wright Mills terms would call the Power Elite, who wealthy individuals are holding prominent positions in Corporatocracies. These individuals pull strings behind the curtain and control the process of determining society’s economic and political policies.

While comparing the powers of corporations and government, in a simple sense, it very clearly reveals that corporations determine what the governments should do; this shadowy control over the political and economic interests of the government by interfering in the legitimate ruling and legislature makes the corporations more powerful than the governments.

Concerning India’s corporatocracy culture, The Delhi-based activist group Association for Democratic Reforms (ADR) has released some startling data about donations received by political parties from the corporates and business houses. The facts given by them, if true, cannot but raise serious doubts about the future of democracy and its essence, people’s rule, in this country. The ADR has found that last year (2013-14), ninety per cent of donations to major political parties came from big corporates or business houses

Conclusion

he corporations are personified through a metaphor “there is no necessity to personify an immortal spook and to whisper of it that it often acts almost humanly”. Speaking of the entities  performing things and of possessing powers and privileges was a mere fiction., The incidents and characteristics commonly assigned to corporations are merely privileges utilizing which individuals possess. However, this feature has completely changed in the current scenario; the government being the political entity, is left only with the managerial role and power to boost the people’s economic interest, while the corporations have usurped the government’s social, economic and political existence. Growing at a tremendous speed, corporations have begun to rule the globe with their supreme power of revenue generation.

A corporation may exercise two types of powers: (1) express powers, set forth by statute and in the articles of incorporation, and (2) implied powers necessary to carry out its stated purpose; these powers concern internal managerial affairs. Whereas while deliberating on the powers exercised circumscribing the matters beyond the corporation management, it is undeniable that corporations hold more power than governments. No law or statues confer them the same. Therefore, it is evident that corporations hold more power over the government. A study suggested that the Cooperatively Managed Corporations (CMCs) policy framed by considering the United States market structure ensured prosperity to all Americans with a sustainable economic demand and minimized malpractices that lead to financial growth with minimal government interference. It will help to maintain the equilibrium with the powers of the government and the corporations without overlapping. It also ensures that the wages of hard-working people will be on par with their productivity, thereby regenerating consumer demand, eliminating budget deficits and paving the way for a balanced economy.

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