MGT7019+Michael+Novak


 * Assignment:**

Outline the Role of the Corporation:
The modern business corporation is an original creation of the American imagination. It was first fashioned to extend local markets; then, it became an indispensable means to create a national market. Both American industrialization and capitalism were crucially dependent upon the corporate form of organization. The corporation was not, however, a disembodied "first cause"; it spread in response to concrete economic challenges. But the corporation had first to become a legal instrument before it could be anything else. While the law dealt amply with the internal affairs of corporations, no internal logic dictated the further development of the corporate form. Corporate law, after all, is not a branch of higher mathematics whose cogency requires a series of more elementary operations. External, primarily economic pressures helped generate the corporation. The combined force of those pressures and the nature of American legal thought determined the eventual shape of the modern business corporation. Using Reading 3.4 on pp. 86-89, Michael Novak on Capitalism and the Corporation, answer questions 1-5on p. 89. After reading the document and before answering the questions, initiate your paper with the problem statement; The problem to be investigated is.

Your answers should not simply be your opinion. For each answer to each question, include at least one outside, peer-reviewed article that you can cite as an academic research resource that validates your answer. Length: 5-7 pages


 * **MGT7019-8 ** ||  ||
 * **Ethics in Business ** || = **4 Case Study: Michael Novak: Capitalism and the Corporation** = ||
 * **Stephen **
 * Excellent paper! Your work fulfills all of the requirements for this assignment based the NCU grading template used for this assignment. For some reason, this is a difficult assignment for some individuals to “get a hold of the abstract ideas” behind Michael Novak’s thoughts on Capitalism and the Corporation. You handled this very well. The idea of stakeholders being owners or having a claim against the property of another is certainly what we think of when we imagine someone “staking a claim out on the ground” to identify what belongs to them. I also have this image of “stakeholders” belonging to a group that is building a structure. We stake the foundation and the four corners in to keep the building square and straight so we can start building on it. **
 * Please keep up the good work. ** ||
 * Excellent paper! Your work fulfills all of the requirements for this assignment based the NCU grading template used for this assignment. For some reason, this is a difficult assignment for some individuals to “get a hold of the abstract ideas” behind Michael Novak’s thoughts on Capitalism and the Corporation. You handled this very well. The idea of stakeholders being owners or having a claim against the property of another is certainly what we think of when we imagine someone “staking a claim out on the ground” to identify what belongs to them. I also have this image of “stakeholders” belonging to a group that is building a structure. We stake the foundation and the four corners in to keep the building square and straight so we can start building on it. **
 * Please keep up the good work. ** ||

=**Case Study: Michael Novak: Capitalism and the Corporation**= The problem to be investigated is the different views of the meaning “stakeholder” has in various business management philosophies: the traditional American view of stakeholders as owners, and the social democratic view of stakeholders as those who believe they have claim upon the property of another. One tends toward freedom and liberty while demanding risk and responsibility. The other tends toward slavery and bondage, while only asking for an outstretched hand and the audacity to demand.

Corporations - Since When
The existence of corporations is not a matter of a simple answer and date. It comes down to what one means by the term. Previous business enterprises that were an amalgam of large numbers of people into a single organization for a specific purpose can be traced back to early times in the form of “ monasteries and towns and universities ” ( Jennings, 2009, p. 87 <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">). Most larger businesses until the early 19th century were forms of partnerships, including joint-stock companies. The earliest business corporations were established in England in the 1600s, but “ <span style="color: #0000ff; font-family: 'Times New Roman',Times,serif; font-size: 120%;">were monopolies chartered by the crown for the pursuit of strict mercantilist policies <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">” ( <span style="font-family: 'Times New Roman',Times,serif; font-size: 90%;">Corporation, n.d., para. 2 <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">). These corporations took the form of what we’d consider a public corporation now. Modern private corporations that are not state sponsored came into being during the early 1800s and gradually transformed in Europe and the United States into what we know today.

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">A Matter of Style: European and American Corporations
<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">The organizations that have become the corporations of today began with the formation of the British East India Trading Company (EIC) in 1601, followed closely by the formation of the Dutch East India Company (VOC). Both were created by a monarch for a specific purpose. European style companies continued to be created for specific mercantile purposes usually at the behest of the crown, or parliament. Novak (1997) identifies this reliance on the support of the state for the authority of founding corporations, and the unwillingness to innovate or deviate from the past, held the European corporation at a disadvantage in relationship to its American counterpart. Novak identified the formation of schools of higher learning and the quick implementation of railroads as examples of the difference. <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">This author, however, finds this to be not quite so easy of an answer. Peter Drucker stated that “ <span style="color: #0000ff; font-family: 'Times New Roman',Times,serif; font-size: 120%;">business enterprise has two – and only two – basic functions: marketing and innovation <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">” ( <span style="font-family: 'Times New Roman',Times,serif; font-size: 90%;">Drucker, 1954, p. 37 <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">) European corporations have long stood the test in regards to marketing. If one looks at the history of the EIC, one could argue that it was the major factor behind many of the most important events in world history between 1750 and its eventual demise in the 1870’s, and in the eventual form of the modern corporation. The reach of the EIC in its day had much more influence and actual power over the world than any of the mega-corporations of today. <span style="color: #0000ff; font-family: 'Times New Roman',Times,serif; font-size: 120%;">The EIC maintained an army. Its merchant ships often carried vastly more firepower than the naval ships of lesser nations. Its officers were not only not prevented from making money on the side; private trade was actually a perk of employment. . . . And finally. . . there was nothing preventing its officers. . . from simultaneously holding political appointments that legitimized conflicts of interest <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> ( <span style="font-family: 'Times New Roman',Times,serif; font-size: 90%;">Rao, 2011, para. 55, italics in the original <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">). <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">What distinguished American corporations in the beginning from their European cousins was the introduction of Drucker’s second business function – innovation. The authority to register business in America was given to each of the individual states in the United States constitution, and beginning in the early 1800’s the states began to compete for the revenues of corporations, loosening the strictures on the formation of corporations, while granting them more and more legal standing. Novak (1997) noted that the freedoms and liberties enjoyed by citizens in America also contributed to the growth and innovativeness of the corporation - not based on “ <span style="color: #0000ff; font-family: 'Times New Roman',Times,serif; font-size: 120%;">state privilege, monopoly, trust, or grant <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">” but as a consequence of “ <span style="color: #0000ff; font-family: 'Times New Roman',Times,serif; font-size: 120%;">independence from the state. . . [and an] unparalleled social flexibility and a zest for risk and dare <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">” ( <span style="font-family: 'Times New Roman',Times,serif; font-size: 90%;">p. 35 <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">).

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">Definitions of Stakeholders
<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">According to Novak (1997) there are two contexts in which the term “stakeholder” is held. The republican view (small “r”) of the Founding Fathers is that “ <span style="color: #0000ff; font-family: 'Times New Roman',Times,serif; font-size: 120%;">all citizens of the republic have a stake in the success and vitality of American corporations. From these derive Americans’ financial independence from government and their practical freedom of action <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">” ( <span style="font-family: 'Times New Roman',Times,serif; font-size: 90%;">p. 42, italics in original <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">). This view holds that private ownership of property, and the ingenuity of managing that property individually brings the greatest public good, and produces greater innovation, than would state sponsored ownership. It might be of interest to research how many of the advances over the past two hundred years came because of lack of state intervention and the freedom of the individual. “ <span style="color: #0000ff; font-family: 'Times New Roman',Times,serif; font-size: 120%;">In this context, stakeholder means owner and private risk taker <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">” ( <span style="font-family: 'Times New Roman',Times,serif; font-size: 90%;">p. 43, italics in original <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">). In the republican view, the citizen has God given rights that are used to protect him from the abuses of government. <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">The social democratic view of the term stakeholder is the “statist” view of the entitled citizen. In this view all property, all rights, and all privileges come from the state, and are to be granted or revoked by the government. This sounds very similar to the way things had been done for centuries prior to the beginning of the American experiment, and the explosion of innovation that resulted. The purpose of government in the social democratic view becomes to protect individuals from themselves, and from “evil” corporations. The greatest good is not determined by some “invisible hand” but by the government which is owed all faith and loyalty, to whom one hopes. As Novak (1997) recognizes: “ <span style="color: #0000ff; font-family: 'Times New Roman',Times,serif; font-size: 120%;">The paradox of socialism is that it actually results in the opposite of its hopes: an unparalleled isolation of individuals from the bonds of personal responsibility and social cooperation <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">” ( <span style="font-family: 'Times New Roman',Times,serif; font-size: 90%;">p. 45 <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">). It results in individuals who are constantly asking what’s in it for them, without ever asking the more important question of “ <span style="color: #0000ff; font-family: 'Times New Roman',Times,serif; font-size: 120%;">what can I do to help bring this about? <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">”

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">The Effects of Social Democracy
<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">It never ceases to amaze this author that human beings seemed absolutely determined to not learn from the lessons of the past. For thousands of years power has resided in the state, or monarch, during which time progress and innovation were almost nil. When the constitution was signed, mankind was little varied from their predecessors in terms of transportation, farming, and almost every other craft. For seventy years the specter and threat of communism proclaimed that their system of social democracy and state ownership of property and the souls of men was a superior philosophy and economic way of life to capitalism. Yet the wall came down, the former Soviet Union collapsed, and it was seen that the threat, though real in terms of military might, was hollow in terms of the economical. In China, it has become necessary to allow for individual ownership in order to feed the people. In Europe the economy of nations are at the point of collapse and bankruptcy because of the over extending of obligations that government has made to its people, without a sustainable way of meeting those obligations. And yet here in America, we continue to make choices that follow in the way of Europe. <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">In discussions with others of a different persuasion, the author proposes that the listener wants something really badly, but they don’t really need it, and the cost of this object is $100. Then he offers two situations. In the first situation, the listener must go to work, and work hard to earn that extra $100, keeping in mind that they have other obligations. In the second situation, $100 is given as a birthday gift from a dear friend. The author then asks, in which situation, or both, would the listener get the object that they want, but do not need. Invariably the listener chooses the scenario in which the money is given, but not the one where the money is earned. <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">From this the author has determined that individuals treat their own money, that they have worked hard to earn, with more respect than they do with money that is not their own – whether that money be borrowed, or gifted. If this is true with one’s own money, how is this any different for government workers and the taxpayer’s money? Good causes are never-ending in society. An itinerant carpenter once said, “ <span style="color: #0000ff; font-family: 'Times New Roman',Times,serif; font-size: 120%;">For ye have the poor with you always <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">” ( <span style="font-family: 'Times New Roman',Times,serif; font-size: 90%;">Mark 14:7 <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">). There will never be enough money to solve all of the world’s problems, or any specific person’s problems, and this is the destructiveness of the social democratic philosophy – we give people the idea that they are not responsible, and then tell them that they have rights to receive things that they are entitled to it, without any expectation that there needs to be some contribution toward it. <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">Communism has been shown as an unsound and invalid lie, and yet the modern socialist still believes that it is the power of the state, the power of the collective, that will solve all of the world’s problems. While the modern socialist speaks in capitalistic terms, they have shifted the meaning of the terms in order to gain the moral high ground, for the greater good. Unfortunately, it has been shown that when one cannot control or retain the personal property that one has worked so hard to gain through one’s own effort, the motivation to continue to strive and gain more diminishes. As the output and effort of person after person diminishes because of the burdens placed on the common shoulder because of the demands of the many – the burden becomes heavier as more and more drop out. Ultimately the economy collapses because no one is willing or able to carry the load. This is why it seems unrealistic and unbelievable to those who subscribe to a social democratic view that when government cuts taxes on the population, for some unidentifiable reason (to them) tax revenues increase – while, when the tax burden is increased on those most able to handle it, the actual amount of tax revenue decreases. <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">The final effect of social democracy is that the state gains total control over a person’s efforts and property – what a person earns is not truly their own. Ultimately, social democracy results in slavery, or the “ <span style="color: #0000ff; font-family: 'Times New Roman',Times,serif; font-size: 120%;">relationship whereby one person has absolute power over another and controls his life, liberty, and fortune <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">” ( <span style="font-family: 'Times New Roman',Times,serif; font-size: 90%;">Slavery, 2003 <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">).

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">Not a Cold Meteor Fallen From the Sky
<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">Dr. Novak (1997) makes the case that freedom and liberty is required for the republican view of stakeholder to continue to exist. Freedom must be fought for. Responsibility must be accepted. Work must be enthroned as a higher good – not just because of the benefits of pay, and insurance – but because it is only as each individual works, that business can truly grow to provide the jobs, desirable goods, new wealth, and independence that are necessary for the continuance of the American experiment. The form of the corporation, and the innovation that made America the defender of freedom throughout the world, did not just happen by chance – it became what it did because of the inventiveness, and drive, and determination, and hard work of a free and responsible people. <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">This author believes that Dr. Novak’s statement indicates the opposite effect could be just as possible. If the American people turn their back on the principles that made America what it is, they could easily lose the freedoms and liberties they have gained. If they continue to make excuses, rather than taking responsibility – if they continue to demand the substance of others, rather than working to earn it for themselves – America could truly become “ <span style="color: #0000ff; font-family: 'Times New Roman',Times,serif; font-size: 120%;">a cold meteor fallen from the skies <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">” ( <span style="font-family: 'Times New Roman',Times,serif; font-size: 90%;">p. 50 <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">) – dead, while also deadly, causing the collapse of the world economy.


 * = References ||
 * * Corporation (n.d.). In //Encyclopædia Britannica//. Retrieved from http://www.britannica.com.proxy1.ncu.edu/EBchecked/topic/138409/corporation?sections=138409main,138409Citations&view=print
 * Drucker, P. F. (1954). //The Practice of Management//. New York: Harper & Brothers.
 * Jennings, M. (2009). //Business Ethics: Case Studies and Selected Readings// (6th ed.). Mason, OH: South-Western Cengage Learning.
 * Novak, M. (1997). Capitalism and the Corporation. In //The Fire of Invention: Civil Society and the Future of the Corporation//. Lanham, MD: Rowman & Littlefield.
 * <span style="font-family: 'Times New Roman','serif';">Rao, V. (2011, June 8). A Brief History of the Corporation: 1600 to 2100 [Web log comment]. Retrieved from http://www.ribbonfarm.com/2011/06/08/a-brief-history-of-the-corporation-1600-to-2100/
 * <span style="font-family: 'Times New Roman','serif';">Slavery (2003) In //Collins English Dictionary – Complete and Unabridged//. New York: HarperCollins Publishers. ||