Foundations of Business

1
Foundations of Business Society

• Lecture 5
• The Rise of the Corporation

2
Pre-independence America

• Why did Americans mistrust corporations?
• Trading companies, e.g. East India Co.

3
American Economic Development(Independence
Civil War)

• Heavy use of tariffs (protectionism)
• Strict control of corporations (see below)
• Slavery
• North (manufacturing) South (agriculture)

4
U.S. CORPORATE LAW(ANTEBELLUM)

• Corporate charters regulated
• Function
• Lifespan
• Corporate property ownership
• Location
• Use of profits
• Share ownership
• Shareholder liability

5
Trusts and holding companies

• Trusts (e.g. Standard Oil American
• Cotton Oil Trust) founded in 1880s
• Federal states combat trusts (1880s)
• dissolution
• 1890 Sherman Act
• Trusts response incorporate

6
Trusts and holding companies (cont.)

• 1889/1890s New Jersey relaxes
• property law
• 1889 American Cotton Oil Trust
• incorporates (holding company)
• W. N. Cromwell legal representative
• of American Cotton Oil Trust

7
Effects of NJ legislation

• Corporations relocate in NJ
• Trusts incorporate in NJ
• Inflow of revenue to NJ outflow from other
  states
• Other states follow suite

8
The origins of globalization?

• Race to the bottom
• States compete with each other for
• mobile resources they compete by
• offering mobile resources favourable
• conditions on which to do business, e.g.
• lax environmental standards, lax labour
• safety laws, low wages, low corporate tax
• rates, etc.

9
The modern corporation

• What are modern corporations permitted to do?
• Are there constraints on corporation?
• Alien Tort Claims Act

10
Wordlist

• p. 41 stymied quintessentially
• p. 43 consignees
• p. 54 scofflaw