In modern world practice, the corporation has become the main form of organization and management of business processes, which require the union of several stakeholders at once. Let us consider in more detail what a corporation is, what are its characteristics and types. And also highlight the main differences between the western and eastern models of corporate associations.
Corporation concept
According to a general definition, a corporation is an association of legal entities and individuals to achieve a common goal. Together, this combined group represents a new legal entity, and each of its participants is the owner of a certain share. Interestingly, the owners of these same shares almost never engage in management. In fact, the corporation is managed by hired workers, specialists in their field.
What is a corporation in its structure? This is a union that has an internal organization and unites its members into a single collective. He is also the subject of duties and rights. It’s even easier to decipher a corporation as a group of people united by one common goal and carrying out their activities for a long time to achieve this goal.
A corporation may have several different businesses under its “roof”, but all of them are under uniform financial control.
Corporation specifications
Financiers identify several key features that characterize corporations. Among them:
- The presence of owners or shareholders who may own blocks of stock of various sizes. Shareholders are separated from the management, however, serious decisions are made on the board of directors. In other words, never one person can solve any important issues on their own, this is a group of people.
- There is a delegation of authority, that is, several “nodes” of decision-making are created;
- The corporation includes several enterprises of various nature at once. In this case, the activities of corporations are specifically focused on different types of businesses in order to distribute risks between them.
- Leading market position. A strong market position (for example, construction) allows corporations to manage this structure, produce and sell products, and form a market for new products.
- A huge number of employees, which can reach several thousand people. This fact makes the management process difficult, since it is necessary to establish clear control and verification of the quality of work.
It is often mistakenly believed that corporations are companies in a particular industry. However, this is far from the case; corporations and companies are significantly different from each other. In particular, companies have no global influence on the market, while corporations are able to organize new markets.
What is important for corporations?
One of the most important points affecting the credibility of a corporation is its image. All large corporations must take care of their positive image in order to be attractive to society. To this end, any self-respecting corporate association seeks:
- Be socially oriented. This means that any products and services must meet the needs of society.
- To bear social responsibility, i.e., to provide each employee with the necessary social package, including various guarantees and insurance, the possibility of timely medical assistance, etc.
- In their activities do not violate laws and regulations.
- Putting consumer desire first, because the financial position of the corporation depends on its waste.
- Respect the rights of employees, partners and take into account public opinion.
Also important for corporations is the corporate culture. After all, what is a corporation without its own culture and traditions? Each such organization has its own internal formal and informal rules of the "conduct of the game", its own code of ethics and honor, or even its own constitution. This allows the whole team to engage in activities for the common good, and each member to feel involved in something single and global.
Corporate History
Many centuries ago, people did not know what a corporation was in its modern interpretation, although corporate associations had already begun to appear. For the first time, their occurrence was noted in the time of Ancient Rome, when the republic was allowed to create new corporations without problems. The only condition was compliance with state laws. The rules changed when the time of empire came: to create a corporation it was necessary to apply to the Senate for a special agreement. Management was carried out by people selected from the creators. If the activities of the corporation ceased, then all of its property was divided between the participants.
Today, the oldest corporation is considered a copper mine called Stora Kopparberget, located in Switzerland. As early as the 14th century, this association received a charter signed personally by King Magnus Ericsson.
In the XVII century, many European states had the right to conduct business with their colonies. Such organizations are somewhat reminiscent of modern multinational corporations. Examples include the Dutch East India Company and the Hudson's Bay Company.
Modern corporations
Nowadays, the key role in the market economy of most developed countries is played by super-large united organizations - corporations. In particular, in the United States, Canada, Japan, corporations are considered the main form of business. In these countries, more than fifty percent of industrial production and trading activities are controlled by corporate associations. Also, thanks to the existence of corporations, the leading powers of the world own most of the licenses and patents for the latest technical developments, medical products, etc.
A distinctive feature of modern corporations is that their duration is unlimited, since shares can be freely transferred to other owners. The corporation may also issue a new block of shares in order to attract investors and, consequently, investments from the outside.
Types of corporate associations
Today, there are several varieties of corporate associations that are accepted in most countries of the world:
- joint stock company of open type;
- limited liability company;
- syndicate;
- cartel;
- trust;
- pool;
- concern;
- holding company;
- financial and industrial groups;
- transnational corporations.
Obligations and rights
In each power, the law defines the responsibilities and rights of all types of corporations. There are also legislative restrictions on the forms of activity of corporations and their composition, as well as special measures to prevent their transformation into a monopoly. In case of violation of any rules or restrictions, the state has the right to apply sanctions against the corporation-violator.
In 90% of cases, enterprises that are part of a corporate association are completely dependent on it economically and financially. But it happens when an enterprise has its shares and its shareholders. Such an example is a financial corporation, which unites financial groups under its “wing”.This suggests that relations within corporations are quite complex and diverse.
Forms of Economic Relations
Among the large number of variations in relations between enterprises and corporations, experts single out those that are most often encountered:
- Corporate financial management by the corporation. In this case, the company carries out all other activities independently. The obligation includes only a clause regarding finance - the execution of a certain part of the corporate budget.
- Takeover organization. This means that leadership, management, and operation are completely in the hands of corporate managers.
- Purchase of an enterprise that was auctioned due to inefficient activities.
- The transformation of organizations into branches of a corporation that become a representative office of an association in another city or country.
- Creation of a consortium - a temporary association of organizations and firms in order to solve any common production problem.
Differences between Western and Eastern models
For example, consider the American and Japanese models of corporate associations. The main difference in them is corporate behavior and attitude to work. If the Japanese, including even the smallest entrepreneurs, are focused on the common interests of the corporation, then the Americans are more worried about personal growth. This shows the level of individualism.
In the East, it is an honor for an employee to work for one company all his life. For a Japanese, changing a company means almost the same as getting a divorce from his wife, which is unacceptable in society. And for a resident of Western countries, it’s quite normal to send resumes to different corporations and switch to one where more favorable conditions are offered.
However, both models have their advantages and disadvantages. Japanese corporations have always produced quality products, even of mass production, than they won over other companies. But as regards innovation in various fields, American associations are leading here.
