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The historical role of the corporation in society

Davoudi, L., McKenna, C and Olegario, R.

This paper discusses the historical role of the corporation in society from antiquity to the present day. It argues that since the dawn of legal personhood, social purpose has been the defining trait of the corporation. This connection was formally broken in the 19th century through general incorporation laws but many corporations continued to impact society positively on a voluntary basis. Contemporary concerns regarding corporate power are rooted in a long history of similar sentiments.

From the earliest records of goods being traded in the third millennium BC, through Hammurabi’s Laws in Babylon and the partnership contracts of the Ancient Romans, corporate laws evolved to include concepts and practices recognisable today. The ‘moral person’ legal form spread through Medieval Europe, adopted by municipalities, towns and universities for political, religious, educational and civic purposes and organised through the Medieval Guilds such as the Hanseatic League, the cohong in China, the esnaf or loncalar in the Turkish world and the Livery companies of the City of London.

The early modern corporation was an instinctively and inherently social entity. The global chartered trading companies of the 17th to 19th centuries, backed by the imperial ambitions of their governments, were mandated to increase trade and economic prosperity, but also to provide employment, housing, medical and educational services in their trading localities.

However, their immense scale and power eventually provoked protest strikingly similar to contemporary concerns, leading to new Trust legislation and greater regulatory scrutiny. From 1811, different US states passed their own legislation. In Britain, the Registration Act of 1844 permitted anyone to register a corporation, just in time for the railway company mania. Under the Joint Stock Company Act of 1856 firms no longer depended on Parliament to incorporate, ending the statutory link with social purpose.

While some industrialist philanthropists such as Macy’s and the DuPont families in the US, the Cadbury Brothers in the UK, and Krupp in Germany initiated corporate welfare plans, corporations in general grew larger and more powerful, and finally, once again, became an issue in US politics. In 1890 the US Congress passed the Sherman Antitrust law, and after further constraints, the National Labor Relations Act in 1935 was another step to control the perceived excesses of big business.

The period from 1950 to the 1980s proved the heyday of worker-orientated, industrial paternalism, but by the 1990s, the social contract between America and the ‘good corporation’ had disappeared. Corporate performance was measured in shareholder value rather than jobs created. There were exceptions: Germany passed the Codetermination Act passed in 1976. The Co-Operative Group and the John Lewis Partnership formed in the UK and the Mondragon Corporation flourished in Spain, but a profit-maximising ideology dominated.

The history of the corporation puts in clearer perspective the current criticisms against publicly traded, multinational behemoths, seen to be exploiting regulatory arbitrage and driven by short term profit targets to the detriment of social, fiscal and environmental concerns. History demonstrates that social purpose was not incidental to the privilege of incorporation; instead, it was inseparable from the right to incorporate. It is within the power of the state to devise forms which meet this ambition.

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The historical role of the corporation in society

Leonardo Davoudi, Christopher McKenna and Rowena Olegario  | 

This article charts the historical role of the corporation in society from antiquity to the present day. Using a broad temporal and transnational approach, it argues that social purpose has been a defining trait of the corporation since the concept of legal personhood first appeared in antiquity.

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