Reply #320: interesting article on the history of corporate charters and the revocation movement

[BREMPRO]

http://www.reason.com/news/show/28088.html

"The revocation movement’s account of history has been laid out in many places; one is Taking Care of Business, a 1993 pamphlet by activists Richard Grossman and Frank Adams. The tract notes that in the early 19th century, enterprises took many forms, from limited partnerships to unincorporated associations to cooperatives. “Legislatures also chartered profit-making corporations to build turnpikes, canals and bridges,” the authors write. “By the beginning of the 1800s, only two hundred such charters had been granted…. Citizens governed corporations by detailing rules and operating conditions not just in the charters but also in state constitutions and state laws.”

The pamphlet does not explain why a business would tolerate such restrictions, if all it need do to avoid them was not incorporate. The answer, of course, is that incorporation bestowed certain advantages. In those days, historian Robert Hessen notes in his 1979 book In Defense of the Corporation, corporate charters often included special privileges, such as “a legally enforced monopoly, exemption from taxation, release of employees from militia and jury duty, power to exercise eminent domain, and authorization to hold lotteries as a means of raising capital.” Others received direct subsidies from the government.

Those benefits were awarded only to particular corporations. Another perk was conferred on just about all of them: The corporate form limited shareholders’ liability for the corporation’s debts, decreasing the risk of investment and allowing greater concentrations of capital. This is what Ambrose Bierce had in mind when he defined a corporation as “an ingenious device for obtaining individual profit without individual responsibility.” There are those who argue that this practice could only exist with state intervention—that is, through incorporation laws. There are others, such as Hessen, who argue not only that it could emerge as a matter of contract, but that it has so emerged, and that incorporation today is merely a convenient legal shortcut. (This is separate from the issue of limited liability for harms caused to third parties, a legal doctrine that is somewhat harder to defend.)"