CORPORATE ALCHEMY IN THE 21ST CENTURY
Since the advent of the corporate form in 1602, business has faced conflicting pressures: governments have needed the ability of private organisations to raise capital and solve complex collective problems but have also feared their rivalry. Large pools of capital, centralised authority and decision making are scary to less flexible governing bodies. And yet today, new models of platform partnerships may offer great hope for global prosperity, political stability and narrowing of persistent income inequality.
This ambivalence has shaped several dramatic shifts in corporate governance over the years. The first transition occurred in the 19th century, when the industrial revolution dramatically shifted production away from the small owner operator to large hierarchical firms that employed thousands, with few restrictions on how those employees could be used and abused.
In the late 1800s, corporate giants replaced small firms, propelling societies forward and frightening governments. “If we will not endure a king as a political power, we should not endure a king over the production, transportation, and sale of any of the necessaries of life,” said US Senator John Sherman, father of the Sherman Antitrust Act, in 1890. As president, Teddy Roosevelt succeeded in radically reducing the power of the resulting huge monopolies. Business might have learned an important lesson then. If you squander your social licence to operate, size is a liability.
This realisation stimulated a new development: the institutionalisation of corporate philanthropy. While individual business leaders had been among America’s top donors since the 17th century, in the 20th century, philanthropy became an essential part of doing business in the US. This helped to sustain an implicit ceasefire, with government more inclined to allow business to operate with minimal interference.
Jan-Mar 2020 Issue
Solon Group