Free Economics Dissertations - They Also Gave Birth To An Organisation That Soon Seemed To Acquire A Life Of
They also gave birth to an organisation that soon seemed to acquire a life of its own, swiftly mutating from one shape to another, nobody finds it odd that, a century after its foundation, the Minnesota Mining and Manufacturing Company makes Post-it notes, or that the world’s biggest mobile-phone company, Nokia, used to be in the paper business.
The Victorians also gave us many of the most profound arguments that swirl around companies. Nowadays it is assumed that the causes of capitalism and companies are inseparable. Yet many of the earliest critics of the joint-stock company and the ‘subsidy’ of limited liability were economic liberals, taking their cue from Adam Smith, who had derided them as antiquated and inefficient. One noted Victorian, A.V. Dicey, stated that the company would become the cornerstone of a new age of collectivism: ‘one trade after another’ would pass from the ‘management of private persons into the hands of corporate bodies created by the state (Karl Max gave a grudging welcome to companies for much the same reason).
Critics to this definition claim that it was not just a question of allowing investors to repudiate responsibility for their debts; many Victorian liberals also worried whether professional managers could be trusted to act in the interests of the owner shareholders. They had a point: the potential conflict of interest between the ‘principals’ who own companies and their ‘agents’, who run them, which was later dubbed the agency problem, has dogged the history of the company, from the mills of Lancashire to software start-ups in Palo Alto, with shareholders repeatedly trying to find ways to make managers interests the same as their own (most recently with share options) and managers usually wriggling out of them. John Stuart Mill settled his own doubts on this score only by wearily concluding that for new capital-hungry businesses, like railways, the only alternative to the joint-stock system was direct state control.
IN AMERICA
This was where the influence of companies was greatest, the howls against ‘the malefactors of great wealth reached a crescendo at the beginning of the twentieth century. Yet no sooner had society reined in the robber barons than it discovered that a still less accountable villain had seized control of the company: the faceless manager. The rise and fall of the juggernauts of corporate America forms a large part of our story. Of course, not everybody worked for them, but it sure felt that way. Until 1975, the big American corporation was the model against which all other sorts of company were measured. Yet, since then, Company Man, too, has been chased out. Companies have become flatter, less hierarchical organizations. Throughout, the twentieth century, the company jostled with the state that spawned it. European and Asian governments tried to run companies of there own, and failed spectacularly.
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