Questioning the Corporation
From The Observatory
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From trading posts to tech empires, corporations continue to grow in strength. Without reform, their power may soon eclipse public control entirely.
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“Questioning the Corporation” by John P. Ruehl is licensed by the Observatory under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License (CC BY-NC-SA 4.0).
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Introduction
Home to almost 70 percent of Fortune 500 companies, Delaware's reputation as America’s “corporate capital” has faced challenges in recent years. Tesla’s and SpaceX’s high-profile exits to Texas in 2024 highlighted other cracks in Delaware’s seamless relationship with large corporations, compounded by other states jockeying to attract businesses. Delaware’s government has launched a legislative charm offensive in response, passing several amendments in March 2025, which have eased restrictions on insider deals and reinforced the state’s commitments to low taxes and a business-friendly legal framework.
Corporations can be created in minutes almost anywhere, yet all share a core identity as legal entities with rights and responsibilities. Over time, they have replaced religious institutions and political parties as the most powerful actors in society, largely shaping what we consume, how we work, and influencing behavior and social norms. Their modern form traces back to 17th-century charters, with roots in Roman law. Though often tools of the state, global corporations have proven capable of operating across borders and legal systems, developing unprecedented sovereignty and power.
The benefits of corporations, including lower prices from scale, capital-driven innovation and efficiency, and global reach, have been undermined by the relentless accumulation of financial assets, particularly in the West. Short-term gains often supersede long-term value and sustainability, and despite stronger regulation on paper, modern corporations operate with greater independence from the state and increasingly avoid public accountability.
The basic model behind them remains intact, with core legal principles like limited liability and separate legal personality, stemming from early corporate charters from the 1600s and fully developed by the 1800s, still forming the corporate foundation despite enormous growth in their scale and influence. Over the years, calls for democratic renewal and institutional imagination have been mounting, pointing to a long-overdue rethinking of corporate power.
Building up to and Defining the Corporation
Before modern corporations, societies around the world developed institutions to pool capital and dilute risk for trade, construction, and investment. In the Roman Republic, societas publicanorum had transferable shares (partes), professional managers, and central offices, and bid on state contracts for tax collection and infrastructure. However, Roman law allowed any partner to dissolve the business at will, limiting their longevity, and these types of partnerships faded under the empire’s centralized bureaucracy.
After 313 CE, following the Edict of Milan, which legalized Christianity, the Catholic Church gained legal standing that helped it become one of Europe’s first enduring corporate-like entities. By the eighth century, European monarchs began issuing charters that bestowed privileges to monasteries, universities, towns, and tax collection, while guilds of merchants and artisans also emerged in the 11th century. This century also saw the emergence of the commenda in Italy, which allowed passive investors to fund merchant voyages for a share of the profits, an early form of limited liability that spread across Europe. Family banking dynasties from Florence emerged in the 14th and 15th centuries, building pan-European financial networks and eventually expanding to other industries like mining and manufacturing.
Similar models developed globally. The commenda is believed to be inspired by Islamic qirad partnerships that began in the sixth century, where one party provided the capital and the other conducted trade. Beginning in the 1600s, large family firms in China thrived with imperial support. Maritime guilds thrived in Southeast Asian port cities like Majapahit and Srivijaya. Still, it was in Europe, where Roman and Canon Law fused, that legal innovation evolved most dramatically and took on the modern corporate form by the 17th century.
Before the rise of modern corporations, most businesses were family-run shops, temporary partnerships, or informal arrangements that lacked legal separation from their owners. What earlier institutions lacked was the five features defining the modern corporation; representation allowing designated agents to act on behalf of the firm without binding investors; entity-shielding protecting corporate assets from the debts of investors; capital lock-in preventing investors from pulling funds or forcing liquidation; transferable shares letting investors exit without disrupting operations; and limited liability ensuring investors aren’t personally responsible for corporate debts.
The most foundational corporate characteristic is a legal personality, the ability to exist separately from its owners, with its own rights and responsibilities. From the Latin corpus (“body”), this concept lends context to former Republican presidential nominee Mitt Romney’s controversial 2011 remark that “corporations are people.” These features enable corporations to attract capital, own property, sign contracts, and avoid dissolution with membership changes. They vary widely from public to private, with tradable or restricted shares, and can be state-owned, profit-driven, or mission-based. But nearly all corporations share these core traits, which have been used by some to build the most flexible, powerful, and enduring institutions ever created.
The Dutch and British East India Trading Companies
The Dutch East India Company (VOC), founded in 1602, is widely considered the first modern multinational corporation. Though joint-stock ventures had existed earlier (mostly as short-term partnerships for single voyages), the VOC stood apart by introducing permanent capital, tradable shares, and a form of limited liability, attracting strong investment. As maritime trade and colonialism expanded over the previous century, long-term capital was increasingly required for risky, lucrative ventures in spices, textiles, and tea. The VOC met this demand by locking in investment, limiting shareholder exposure, and providing an orderly way to exit. Backed by the Dutch state, it merged competing firms into a single entity with centralized management, enabling it to scale up with unprecedented freedom.
Dutch political institutions also played a role in the VOC’s power. As a new republic, the Netherlands offered investors protection from royal interference. Unlike other European countries where royal families funded and closely monitored colonial expeditions, the VOC operated with more autonomy. It received a perpetual charter and became the first company listed on a stock exchange, and was empowered to sign treaties, raise armies, and wage war, all while shielding shareholders from personal accountability. Despite collapsing in 1799 due to debt and corruption, it pioneered a corporate form unlike anything before.
Two years before the VOC’s founding, its counterpart, the English East India Company (EIC), was formed in 1600. The EIC didn’t obtain permanent capital until 1657 and was slower to adopt liquidity. But the English Civil War curbed royal power after 1657, allowing it to evolve in ways that mirrored the VOC. The Bank of England, founded as a corporation in 1694, helped stabilize credit lines and made it easier for the EIC and other corporations to raise capital.
The EIC eventually came to colonize and rule large parts of India, establishing a civil service and even clashing militarily with the VOC. Yet its power drew intense scrutiny. Following the Bengal Famine of 1770, the English parliament passed the Regulating Act of 1773 and Pitt’s India Act of 1784, curbing the EIC’s powers. The company was finally dissolved in 1874. “In 1857, the Indians rose in revolt against high-handed and oppressive Company rule… The Company lost all its administrative powers following the Government of India Act of 1858, and its Indian possessions and armed forces were taken over by the Crown. … The East India Company itself was formally dissolved by Act of Parliament in 1874,” according to the UK Parliament website.
Though the VOC’s model was emulated by the EIC and influenced commercial ventures elsewhere in Europe, such corporations remained a form of special incorporation granted by state charter, not open to anyone. This exclusivity began to loosen over time, but the South Sea Bubble crash of 1720, seen as the first major financial crash, triggered fears of economic instability and unchecked corporate power. In response, governments reimposed strict controls, requiring corporations to obtain specific approval and follow stringent guidelines.
Corporations proved essential during Britain’s industrial revolution, which began in the late 1700s. To support economic growth, parliament introduced reforms: the Joint Stock Companies Regulation and Registration Act of 1844 allowed businesses to register without special legislation, while the Limited Liability Act of 1855 extended legal protections to shareholders. These reforms, combined with Britain’s access to capital markets and imperial power, kick-started rapid corporate expansion in Europe.
Arriving late to maritime trade, the Dutch and English drove corporate innovation to keep up with other European powers. Politicians supported corporate growth, benefiting from lucrative shares in the monopolies they helped create. But the VOC and EIC demonstrated the promise and peril of corporations. They could generate wealth and wield power beyond what states alone could achieve, but they also bred corruption and posed political threats. European leaders, therefore, aimed to harness the benefits of corporations while limiting their power by closely tying them to government control.
The United States and the Modern Corporate Form
Early British joint-stock companies like the Virginia Company planted the first corporate seeds in North America in the early 17th century. But while European models like the VOC and EIC inspired early colonial enterprises, the corporate form developed more slowly in the U.S. after independence, in both scale and structure. Shaped by a deep-rooted “distrust” of monopolies and state-chartered privilege, and wary of corporations as instruments of elite power and financial instability, many Americans didn’t trust companies that had special deals with the government. Instead, they preferred smaller, more personal business models like family-run shops, partnerships between a few people, or joint-stock ventures where people pooled money but didn’t have the legal structure of modern corporations that offered them protections.
The early U.S. enterprises also lacked strong, centralized authority and consistent legal protections, especially for property and contracts, and many investors in states like Florida, Texas, and California avoided corporate structures until they were included in the U.S. Constitution.
Yet this decentralized system ultimately gave corporations room to grow. Without strong federal control, states competed to attract businesses by loosening incorporation requirements. New York led with the first general incorporation law for manufacturers in 1811, with other states soon following and expanding the scope of the law. The vast, unexploited North American landmass and push for industrialization made the corporate structure increasingly attractive, further aided by America’s quicker and widespread adoption of limited liability and lighter state oversight compared to Europe.
While state legislatures tried to regulate corporations with rules on capitalization, voting rights, and director terms, these measures proved mostly ineffective. Corporations amassed enormous influence, with “company towns” illustrating their growing control over local economies and governance. Corporate imperialism returned under an American banner, with the United Fruit Company, which controlled enormous banana plantations in Central America and used its political influence to overthrow governments.
These towns still exist in some shape or form today. “The original coal and textile towns in America are now largely ghostly, but places like Hershey and Corning, New York, which were invigorated by the Corning glass company, are still going strong. Plus, as the LA Times writes, businesses such as Google and Facebook today are providing housing, amenities, and transportation for their workers—meaning that while we think of company towns in sepia tones, they’re also in digital blue,” states Smithsonian magazine.
In The Visible Hand, Alfred D. Chandler Jr. suggests that the dominance of American corporations by the 20th century was due to their managerial hierarchies rather than entrepreneurs, which provided them with stability, coordination, and centralized planning. This is partly supported in The Company: A Short History of a Revolutionary Idea, which argues that robber barons were replaced by “the faceless manager” and the multidivisional firm.
By the 1930s, legal scholar Adolf A. Berle and economist Gardiner C. Means, whose work shaped modern corporate governance theory, warned that dispersed shareholders had lost control to entrenched managers and called for reforms in corporate oversight. The 1919 Dodge v. Ford case had already enshrined shareholder primacy in U.S. law, declaring that directors must prioritize shareholder profits. But rather than democratizing ownership, the rise of institutional investors, like pension and mutual funds, and other financial giants, further concentrated power among select shareholders.
By the end of the 20th century, globalization offered American corporations, as well as others, a platform to dominate beyond natural borders. The American corporate model became the ruling template in a worldwide ecosystem, largely controlled by shareholder interests and executive compensation tied to quarterly earnings pressures.
The Growing Power of Corporations
Over time, corporations have become the dominant business entities. Despite only representing 18 percent of U.S. businesses, corporations generate nearly 82 percent of all revenues. Around 20,000 large corporations employ as many people as the 31.7 million small businesses, according to the 2024 data provided by payment processor company Clearly Payments. Many of them now function as monopolies or organized cartels. In the 2010 Citizens United v. Federal Election Commission case, the Supreme Court affirmed that corporations have First Amendment rights, including the right to “use money amassed from the economic marketplace to fund their speech.”
Borderless by design, major corporations drive a race to the bottom for cheap international labor and pass sustainability costs onto consumers. Countries often lack the strength to rein them in, and where they can, corporations simply exploit tax havens and flexible jurisdictions. As economist Lynn A. Stout observed, outdated yet profitable business practices like shareholder primacy are hard to shake.
Accountability and sustainability appear largely ignored, with corporations long prioritizing profit over public safety. Asbestos manufacturers suppressed evidence of its deadly health effects to keep selling their products. Tobacco firms knowingly misled the public about cancer risks for decades. Purdue Pharma, owned by the Sackler family, used its LLC status and shell corporations to dodge accountability for the opioid crisis. According to an Associated Press investigation, “the Sacklers’ wealth is shielded in a web of companies and trusts, some registered in offshore tax havens far from Purdue’s Connecticut headquarters,” states a 2019 article by CBS News.
Calls for corporate responsibility have grown as the power of corporations has increased. The corporate social responsibility movement began with philanthropy in the late 19th and early 20th centuries and resurged in the 1970s. Beginning in the mid-2000s, ESG and stakeholder activism sought to revive this initiative, but became politicized and have waned, even as corporate influence continues to grow. As “universal owners” of the economy, institutional investors like BlackRock, Vanguard, and State Street control vast shares and command corporate influence. While it was hoped their broad holdings would make them stewards of the economy, short-term thinking and weak oversight continue to limit meaningful action like prioritizing long-term sustainability, fair labor practices, and avoiding hoarding wealth.
Corporations are wielding new tools of dominance through AI and digital technologies. “Companies such as Walmart, Tyson Foods, Koch Industries, Maersk, Siemens, and Unilever are using AI tools to swiftly find and engage with alternative suppliers during unexpected disruptions. They are also employing AI tools to pre-qualify suppliers ahead of time. These AI tools provide buyers with enhanced information that allows them to beat their competitors in securing alternate sources of supplies,” points out a Harvard Business Review 2023 article.
They can also deflect accountability through PR campaigns, obscure controversies through complex supply chains and legal structures, and offload responsibility to subsidiaries, contractors, or consumers. Combined with the growing use of private military and security contractors, some modern corporations operating in unstable or contested regions are regaining a degree of coercive power reminiscent of the colonial-era trading giants.
The core problem is that while we retain some voice in the political system, that influence doesn’t extend to massive corporate structures. “Voting with our wallets” offers little power when essential services are dominated by a handful of interconnected firms.
Reform
While the corporate model dominates, alternatives continue to evolve. In early 20th-century China, corporate law was weakly enforced, and corporations were uncommon. Today, China exerts control over both state-owned and private corporations, embedding Chinese Communist Party officials into corporate governance. This hybrid model places corporate activity under tighter oversight, supported in part by nationwide social credit scores for all companies.
President Teddy Roosevelt promoted trust-busting as the solution to corporate abuse by big business, but as economist Lawrence Mitchell notes, the prior era of fierce competition among smaller companies was also disastrous. He identified the real problem of states competing for corporate charters in a “race to the bottom,” a danger that Justice Louis Brandeis also noted in 1933. Roosevelt even acknowledged in 1902 that only the federal government could properly regulate interstate corporations, which Mitchell supports.
So, how should governments regulate monopolies? Some countries have taken a more open approach to consolidation. The German government, for example, legalized collusion and cartel formation to control prices and output in ways that serve national interests, actively encouraging the attempted merger of Deutsche Bank and Commerzbank since 2019.
Cooperatives offer another path. The first successful cooperative, the Rochdale Society of Equitable Pioneers, was founded in 1844 in the UK, championing democratic control, open membership, and profit-sharing. In Spain, the Mondragon Corporation, a federation of worker-owned cooperatives founded in 1956, has become the “leading business project in the Basque Country and one of the largest corporations in Spain.” Rather than lay off workers, Mondragon often reallocates them across its network.
New reformist approaches are also emerging in Europe. France’s 2019 PACTE Act allows companies to define a social purpose beyond profit, embedding missions into corporate charters and expanding employee influence in mergers and executive oversight. Economist Mariana Mazzucato has promoted this mission-driven model as part of her vision for innovation-led governance.
In the U.S., Delaware’s recent legislative push is part of a broader effort challenging shareholder primacy, notably since the 2019 Business Roundtable, where top CEOs pledged to serve all stakeholders. Delaware and other American states already allow businesses to register as benefit corporations (B-corps), balancing profits with goals like environmental protection or community development. Existing corporations can convert by amending their founding documents. CHS Inc., a major agricultural cooperative ranked 115th on the Forbes 500 list in 2025, meanwhile, demonstrates how cooperative principles still have traction in the country. It has emerged as one of the “largest farmer-owned cooperatives in the world.”
Digital finance is also leading to experimentation in how businesses are owned and operated. Decentralized Autonomous Organizations (DAOs), for example, are blockchain-based communities with decentralized governance that make decisions by vote. Aiming for transparency and shared control, they face clear hurdles. Unclear legal status has slowed adoption, while security flaws, including a major 2016 breach, have seen millions stolen due to a code exploit. Governance challenges include low participation, power centralization, and slow decision-making. “In some high-profile DAOs, the majority of governance tokens are often held by the founders and early investors, which can skew decision outcomes in favor of their interests rather than the broader community,” states a blog by Colony, a platform providing a framework for DAOs.
Not all innovation prioritizes the public good. The “Network State” concept, coined by tech entrepreneur Balaji Srinivasan, envisions venture-backed private cities, colonies, and zones across the U.S., Latin America, Africa, and beyond. These digital-first enclaves aim for diplomatic recognition and eventual sovereignty through special economic zones, framing private microstates as expressions of libertarian freedom.
Efforts to reduce shareholder power can also backfire by merely concentrating power in the hands of corporate managers rather than all stakeholders. Elon Musk is a clear example; by retaining large ownership stakes, employing dual-class shares, and keeping firms like X, Tesla, and SpaceX private or under holding structures, he has shielded himself from shareholder influence while consolidating control. The planned incorporation of Starbase, Texas, a township effectively governed by SpaceX, demonstrates how this management style can dovetail with Network State ambitions.
Born in the Dutch Republic, matured in England, and transformed by the United States, the march of the modern corporation has proven remarkably resilient over the centuries. Hudson’s Bay Company, founded in 1670 as an English trading giant like the EIC, once controlled vast swaths of North America and now exists as a retail chain.
Corporate power in general, however, continues to expand. After early overreach by the VOC and EIC prompted containment efforts, corporations have resurged through globalization, financialization, and advances in technology. Short-term profit maximization is seen as natural, with structures geared away from wider stakeholder responsibility. Many firms resist direct governance to escape the negative optics of being seen as too powerful, which would bring more scrutiny and accountability. Yet some corporations have grown so large that they have become pillars of modern society and carry significant responsibility, even if they do not openly acknowledge it. Without altering their growing influence, the future will be shaped less by democratic will through established channels and more by concentrated, private authority.
