The Modern Corporation and the Rule of Law

Abstract

The joint-stock company or the corporation as it is called in some parts of the world is such a pervasive institution in modern society that the authority and powers attaching to it appear to persons who may be concerned with its management or to operators in the market place dominated by this institution as something intrinsically belonging to this form of organization. Yet, the truth is that the modern joint-stock company or corporation has come to its present position only after a long process of historical growth and development, which has not only progressively influenced its structure and behaviour pattern but has also basically determined its changing relationship to the rest of the society in which it has functioned. In order to appreciate fully the role and significance of the modern corporation in present-day society, it is important for enquiring minds to know the main stages in the evolution of the historical process, and to view the developments in this field in their proper perspective. The concept of the corporation as a self-governing economic organization is basically as old as the trade guilds of the ancient and medieval times. In our country, mention is found of these inchoate trading corporations in the Arthasastra, and in some of our other earlier literature on the organization and work of our ancient polity, fragmentary as such reference is. In the Western world, the concept cf the corporation appears to have been well-established in law at the beginning of the middle ages, when this concept was applied to ecclesiastical bodies, local civic units like boroughs and to craft and mercantile guilds, which between them embraced the most dominant institutions in the economic organization of society in those days. Later on, the concept was extended to the organization of specialized vocations and professions. By this time, the legal rights and liabilities of the corporation had also been broadly defined. Its principal distinctive features, viz., its right of survival beyond the lives of its members, and its capacity to hold property, to sue and to be sued--