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Unit 4 Social Institutions
Section 4
The Modern Corporation
Key Terms
• corporation • conglomerates • interlocking directorates • multinationals
The Nature of Corporations
Sociologists study corporations because of their great importance in modern economic systems. U.S. corporations, for example, not only dominate the American economic system but also influence the economies
of nations around the world. Corporations represent massive concentrations of wealth. And because of their economic muscle, corporations such as Microsoft, IBM, and General Electric command the attention of government decision makers. As a result, government policies regarding such matters as consumer safety, tax laws, and relationships with other nations usually reflect corporate influence.
What are corporations, anyway? A corporation is an organization owned by shareholders. These shareholders have limited liability and lim- ited control. Limited liability means they cannot be held financially responsi- ble for actions of the corporation. For example, shareholders are not expected to pay debts the corporation owes. At the same time, they do not have a direct voice in the day-to-day operations of the firm. Shareholders are formally entitled to vote regularly for members of the board of directors. But in practice candidates are routinely approved as recommended by the exist- ing board. The real control of a corporation rests with the board of directors and management.
Corporate Influence
Top corporate officials have tremendous influence on govern- ment decisions. This is true for several reasons. Because of their per- sonal wealth and organizational connections, corporate officials are able to reward or punish elected government officials through in- vestment decisions. For example, suppose a town depends on a sin- gle large corporation for jobs and other economic advantages. Corporate officials are deciding whether to increase their operation in this town or move some of the facilities to another town, which would endanger local jobs. Town officials are likely to do what they can to make corporate officials happy so that new investment will be made locally.
This agricultural worker is paid by a large corporation rather than a small business/farmer. Which employer would be more secure?
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Corporations, especially those with multinational connections, have grown very powerful. Corporate managers affect domestic political decision making and influence the political and economic institutions of countries around the world.
corporation
an organization owned by shareholders, who have limited liability and limited control