IV: The First American Corporations--pre-1776

            Corporations as they exist today did not spring up all at once. It took several centuries for the concept to catch on and be implemented as a way of doing business. Viewing this history will help us to see the strengths and weaknesses of the corporate structure and help us to determine how corporations might be steered to contribute to the welfare of all instead of contributing primarily to the profits of a few.

As this series continues, we will also see more clearly the role governments play in making corporations possible. The goal of this series is to provide a foundation of understanding so that we may intelligently tackle the problem of excessive corporate influence, particularly on the funding of electoral candidates. (1).

            To understand the role corporations play in the nation and the world, it is crucial that we see that some very important corporations include more than profit-making businesses.

            The first currently-existing corporation created on the soil of what is now the United States is Harvard University. (3). It was incorporated in 1650 through the action of the Massachusetts colonial legislature, called The General Court (as it is still called today). Harvard’s existence began in 1636; incorporation came later. (2, p. 84). Yale University received its charter of incorporation in 1701. (4). By the time of the American Revolution, nine colonial colleges had been incorporated. (2, p. 84). (Most private colleges and universities today are corporations.)

            In the colonies, communities also sometimes were incorporated. Apparently the very first corporation in the colonies occurred in 1587 when a grant from Sir Walter Raleigh, acting under authority given to him from England, created the city of Raleigh, Virginia (2, p. 30), on an island (later in North Carolina) that was subsequently abandoned. Although it was not always clear which entities had legal status as corporations and which did not, there were roughly two dozen municipal corporations created in the colonies, beginning in the latter half of the seventeenth century. (2, pp. 50ff). Most of them survived up to and following the Revolution. (2, p. 59). However, most cities and towns in the colonies were not corporations or had a disputed legal status. (2, pp. 60-64). In addition to municipal corporations, a few public corporations were established for the purposes of charity or to administer loans. (2, p. 73).

In the colonies there was no clear line separating public from private corporations, but the latter were more directly financed and controlled by private parties. (2, p. 75). These private corporations included many non-business entities, such as religious institutions, e.g., churches and various religious societies. (2, pp. 75 ff). The establishment of such religious corporations started at the beginning of the eighteenth century. (2, pp. 75 ff). Many such institutions were not corporations but enjoyed legal stability in other forms that varied considerably over time and in different places. (2, pp. 75 ff). Private corporations too included entities that were charitable, educational, or a combination of both. (2, pp. 82 ff).

Business corporations existed prior to the Revolution, but their influence was limited. (2, p. 87). Apparently the first business corporation in America was established in 1589 when Sir Walter Raleigh, under authority granted to him by the Queen, granted a group of men a corporation for business. It did not last long. (2, pp. 31-32).

Subsequently colonial corporations came into existence by receiving a charter from the colonial government with no interference by the British. The governmental sources of these charters varied across the colonies: sometimes it was from the governor acting alone, sometimes from the governor with legislative approval, and sometimes from just the legislative body. Most were set up for charitable, educational or religious purposes; a few were for business purposes. There were also many corporate-like associations and societies that lacked one or more of the formalities required to create a corporation. (2, pp. 104-107).

As we shall see in subsequent postings, it was not until the nineteenth century that the business corporation took hold as an important and significant alternative way of doing business. Even so, the concept of the corporation was controversial. The slowness of the rise of the corporation was most likely because, until the middle of the nineteenth century, corporations were too dependent on the governments that created them. The existence of a corporation depended on a specific charter granted by the appropriate governmental authority. For example, the governing body of Connecticut granted a charter to the New London Society for Trade and Commerce in 1732, and then revoked the charter a year later. (5, p. 43). The existence of any particular corporation, therefore, depended on politics. Since one of the purposes of a corporation is to have an extended life beyond the life of any particular owner, there was little reason to form a corporation that may live for a shorter time at the whim of the legislature. Educational, religious and charitable institutions were on safer, less political ground.

As we shall see in subsequent postings, the business corporation as we know it today requires some assurance that its life would not be threatened by a change in the composition of the legislators or governorship in power at the time of the corporation’s creation.

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References (numbers correspond to the numbers in the preceding text):

(1)   Links to other posts in this series:

Corporations (Part I of series): Introduction—Why We Need To Know About Them (2/3/12)

            II. Corporations: Their Early Beginnings (2/18/12)

                  III. Corporations--an Example of Extreme but Conditional Power 
                   (7/3/12)

(2)   Essays in the Earlier History of American Corporations, Vol. 1, by Joseph Stancliffe Davis, New York: Russell & Russell, Inc. (1965) (originally copyrighted in 1917).

(3)   Harvard’s website (as of this posting) claimed that Harvard is the oldest corporation in the Western hemisphere (http://www.harvard.edu/harvard-governance). It does appear to be the oldest existing corporation in the United States, but verifying that the original inhabitants and the various European colonists did not establish an earlier still-existing corporation somewhere in the Western Hemisphere would be difficult if not impossible to do.

(4)   http://yale.edu/about/history.html

(5)   John Micklethwait and Adrian Wooldridge, The Company: A Short History of a Revolutionary Idea (New York, 2003; page references are to the paperback edition, 2005).

Another unspeakable massacre, more to come

We typically blame individuals for bad and terrible things. By blaming individuals, we excuse the institutional and cultural frameworks that provide the channels for the individual acts.

We are all responsible for allowing these institutional and cultural channels to continue. By blaming the individuals for their acts, we absolve ourselves and pretend the wrongdoing has nothing to do with us. But these institutional and cultural channels--including the lack of gun regulation and the level of violence we accept as entertainment--made possible the terrible massacre in Newtown, Connecticut.

These channels will not end overnight. Accordingly, there will be more massacres of the innocent. Nonetheless, we must fight for change or it will only get worse.

The rest of what I would have like to have said was said much better by Nicholas Kristof of the New York Times, “Do We Have the Courage to Stop This?” (link).