Corporate governance

“ Individual and corporate ownership continue, the wage system is not abolished, efficient administration is still to be obtained, but the body of control is not a board of directors responsible only to the stockholders of the corporation, and managing affairs primarily for their own gain, but it consists of representatives of those who contribute money, superintendence, and labor, together with or regulated by a group of government experts, all of whom are honestly seeking the good of all parties and enjoying their full confidence. ”

“ If they act as a corporate body, then the whole law applies to them as to other corporate bodies. If they act as individuals, then we have a corporation which never acts in its corporate character, except in the instances of electing its directors, or instructing them. The corporation possesses many important powers, and is, as a corporation, to perform many important acts, scarcely one of which is to be performed in a corporate character. They are all to be performed by agents, acting as individuals, under general powers conferred by the charter. ”

“ It is clear that corporations created for quasi public purposes, clothed for that reason with the ultimate power of the state to take private property against the will of the owner, hold their corporate powers as carriers in trust for the fairly impartial service of all the public. ”

“ The act makes no provision for the government of the corporations it allows to be created. It leaves it to the promoters to state the mode and manner in which the corporate powers shall be exercised, and the manner of electing trustees, or directors, and officers. ”

“ Their public duties may again be divided into those that are imposed on them by statute, and a still larger number by the common law. As we have seen, stockholders confide necessarily the management of their corporation to directors, who in most cases must necessarily have a largely discretionary power, and who, in turn, must appoint other agents to execute the details of the corporate business. ”

“ Although some closely held corporations, just as some publicly held ones, may not have accumulated significant amounts of wealth, they receive from the State the special benefits conferred by the corporate structure and present the potential for distorting the political process. ”

“ To effect this, corporations have been created in most of the states and granted such liberal corporate powers, without respect to the nature of the business to be conducted, and with terms and privileges so favorable, that private enterprise without large capital cannot compete with them. ”

“ One of the chief difficulties in the practical application of his policies has been that the Government cannot have the power to punish dishonest corporations without first being entrusted with a measure of control over all corporate operations, the concession of which control the honest corporations have felt compelled to resist. ”

“ We are properly devising ways whereby the corporation holds its property or privileges in trust, returning to government (or to society) a fair rental; that is, we are regulating the corporation and making it responsible to the people. What shall we do with the unattached man, to make him also responsible? Shall we hold the corporate plunderer to strict account, and let the single separate plunderer go scot free? ”

“ But they are far stronger today, in view of the enormous development of great business agencies, usually corporate in form. Experience has shown conclusively that it is useless to try to get any adequate regulation and supervision of these great corporations by State action. ”

“ The fact that judges of ability and integrity differ in their construction of the constitution and laws, is well understood by the men who lead and control the corporate interests of the country; as also the further fact that the time is not distant when the question whether the people or railroad corporations shall govern, must be determined. ”

“ In corporations existing at the common law and by charter, there are great diversities both of powers and organization. In some corporations the whole powers rest in a select body, or in select bodies, with powers to perpetuate their own corporate existence, by filling up vacancies in their own body; and such body or bodies constitute the corporation itself, and the meetings and acts done thereat are the meetings and acts of the corporation itself. In short, they constitute the corporation, so far as it has life or organization exclusively. ”

“ There can be no effective control of corporations while their political activity remains. To put an end to it will be neither a short nor an easy task, but it can be done.
We must have complete and effective publicity of corporate affairs, so that people may know beyond peradventure whether the corporations obey the law and whether their management entitles them to the confidence of the public. ”

“ Unless it can then be shown that public interests would be benefited by the changes proposed, the Department might have difficulty to overcome this opposition.
In the next place, corporate control moves within narrower limits and exercises its power in more direct fashion. In theory a corporation is composed of its stockholders, a majority of whom nominate the board of directors. This board in turn appoints the permanent officials and they exercise full control in operation. ”

“ We will carry out reforms to diversify their types of equity and introduce on a trial basis the assumption of powers and responsibilities by corporate boards of directors, competitive open selection and recruitment of executives, recruitment of professional managers, mixed ownership, and employee equity stakes. ”

“ We therefore demand a strong National regulation of inter-State corporations. The corporation is an essential part of modern business. The concentration of modem business, in some degree, is both inevitable and necessary for national and international business efficiency. ”

“ Why do stockholders in banks and large corporations meet once a year and elect high-salaried officials to conduct the business, and a board of directors to sit in oversight, then drop the matter, satisfied that they have done their best for good dividends? That is representative government. It is the only way in which the affairs of a corporation or a nation can be successfully conducted. ”

“ An additional reason for caution in dealing with corporations is to be found in the international commercial conditions of to-day. The same business conditions which have produced the great aggregations of corporate and individual wealth have made them very potent factors in international Commercial competition. Business concerns which have the largest means at their disposal and are managed by the ablest men are naturally those which take the lead in the strife for commercial supremacy among the nations of the world. ”

“ The Consolidated Companies considers itself bound to use franchise privileges and corporate organization for the equal benefit of all those who contribute of their capital, with due regard for those public interests which corporations are created to serve, and to rest content with a fair return upon its own capital and a reasonable compensation for their services, on the part of the officers of the enterprises of which it assumes the responsibility and direction. ”

“ So far as the Constitution of the United States is concerned, a state may, indeed, create a corporation, define its powers, prescribe the amount of its stock and the mode in which it may be transferred. ”

“ It seems as though the representatives of corporate interests, in which large amounts of money are invested, are organizing to make a crusade against the present possessed rights of the producing classes, to the end that, by all corporate organizations combining and making their interests mutual, they may come into the position that shall give them supreme and lasting control over the destinies of the country. ”

“ So the National corporation problem is largely one of the railways, and it involves the best way for the Federal Government to regulate these, and all the corporations, in the interest of trade, commerce and the people, and to do this without imposing unnecessary restrictions upon their legitimate operations and development. ”

“ It may surprise some to learn that the great power concentrated in the President’s hands by Congress has made the great corporations, including the railway companies and banking institutions, ambitious and eager to control the Federal Government itself, and they are resolutely working to control it as far as they can by the force of capital, but as unobtrusively as possible. ”

“ Working Organization and Management.—The corporation’s owners, that is, the stockholders, are the source of all authority and control. Unlike the partnership where control and voice in the management are equally shared by the partners regardless of any inequality in their investments, the corporation ownership is evidenced by shares of stock and each share is given one vote. Thus each owner’s authority and voting power are dependent upon the amount of his ownership of stock. ”

“ The better regulation of corporations was accomplished by a comprehensive Public Utilities Law, fixing the responsibility on officers of corporations for all violations, and vesting power in a commission to make rates and physical valuation of public service companies. ”

“ When the corporation is said, at the bar, to be public, it is not merely meant, that the whole community may be the proper objects of the bounty, but that the government have the sole right, as trustees of the public interests, to regulate, control and direct the corporation, and its funds and its franchises, at its own good will and pleasure. ”

“ The State will have to exert eternal vigilance against the power of private corporations such as the above; but it must also control public corporations and its own departments and again quasi-public corporations like the Bank of England. ”

“ The nature of a corporation is such, however, that many acts and privileges which are per se rights of the stockholders must in their exercise be delegated to others. Thus, while the right of ownership and control of the profits of a corporation is inherent in its proprietorship, the control is indirect—through the medium of a board of directors subject to periodic review and election by the owners. ”

“ Government Regulation of Corporations.—The growth of the corporation as an industrial machine had in recent years been very rapid in the United States. The industrial and financial corporations had grown so powerful as to venture to contend for the first place with the authority of the government itself. As Mr Roosevelt often pointed out, no nation will live long in which the authority of government—especially in a democracy—is supplanted by the private interest of a real money power. ”

“ This general and indisputable principle, puts at once an end to the abstract question, Whether the United States have power to erect a corporation; that is to say, to give a legal or artificial capacity to one or more persons, distinct from the natural? ”

“ Those great corporations containing some tendency to monopoly, which we have grown to speak of rather loosely as trusts, are the creatures of the State, and the State not only has the right to control them, but is in duty bound to control them wherever the need for such control is shown. There is clearly a need of supervision—need to exercise the power of regulation on the part of the representatives of the public, wherever, as in our own country at the present time, business corporations become so very strong, both for beneficent work and for work that is not always beneficent. ”

“ Government management is, indeed, proverbially jobbing, careless, and ineffective, but so likewise has generally been joint-stock management. The directors of a joint-stock company, it is true, are always shareholders; but also the members of a government are invariably taxpayers; and in the case of directors, no more than in that of governments, is their proportional share of the benefits of good management, equal to the interest they may possibly have in mismanagement, even without reckoning the interest of their ease. ”

“ The significance of it comes home, however, only to those who understand the difficulties of successful management of great corporations and who appreciate the multitude of decisions as to policy which must have been, on the whole, soundly made, at least from the point of view of the corporation itself, in order to achieve such a success. ”

“ Others progressively inclined accept the principle of government regulation and believe that in that way the people, through their political representatives, can control the owners and managers. Others think that the best results can be obtained by giving a place on the governing board of an industry to working men alongside the representatives of capital and permitting them to work out their problems on a mutual basis. ”

“ For more than a hundred years corporations have been used as agencies for doing work of the government. Congress may create them 'as appropriate means of executing the powers of government, as, for instance, * * * a railroad corporation for the purpose of promoting commerce among the states.' Luxton v. ”

“ I certainly believe every corporation must have its rules, otherwise executives would be besieged all day by timewasters. The United States government is surely a corporation, as I always used to say in advocating election of a business administration, and standard procedures and regulations are essential. ”

“ The role of government corporations in the realm of economic development lies essentially in undertaking ventures in new and untried fields where the risks involved may inhibit private enterprise.
In this sense, therefore, government corporations play a pivotal role in the attainment of our development objectives, particularly in the areas of production and industrial development and social amelioration. ”