Business Corporation as fiefdom

Most of the economic frauds during the last few years in the country remain exhumed in the world of business enterprises. There are, however, instances of other realms where such occurrences are manifested in BCCI/IPL. Though we have inherited different kinds of business organisations through the colonial legacy, the Joint-Stock company or Business Corporation and a few others are found to be very prominent. The kind of business organisations that conquer commerce and trade is a very important element of analysis for understanding the resilience of capitalism in the 21st century. The triumph of world capitalism is declared by experts as final for there is no alternative (TINA) to it, particularly after the Soviet and Chinese experiences.

The efficiency and the democratic space provided by the Business Corporation is eulogised by management gurus as the most sustainable model that is beyond disparagement. In fact, we have dozens of treatises and memoirs by great innovators and entrepreneurs who became icons overnight after the 1991 economic policy. They have all used the public / private Corporation as a tool to accumulate capital and run the business. It is claimed that the company/ corporation as a registered business organisation is within the values of democracy and, at the same time, enjoys freedom to do what is good for the company or corporation. This is one of the most important innovations adopted by the capitalist system to compete and outwit a demoralised totalitarian model.

Though the modern capitalist system is far ahead of what its critiques hypothesised during the 19th century, the intellectual and media support during the current phase has disguised most of its failures through 2008 recession and its aftermath. There is a serious upshot in the ethical dimension of business ventures due to the unscrupulous practices paraded as optimal outcomes. This has no doubt enhanced the economic status of some individuals and groups, but all of them have lost the moral bearing that the accomplishments are within the norms of civilized and commonly agreed behaviour.

It is here that one can find that the erstwhile socialist countries were more upright during the periods of collapse (plunge is drastic subsequently) than the kind of decadence we witness in the liberal societies now. The naked display of extreme voracity internalised by some persons and groups is so dreadful that it will ultimately annul the distinction between a human and an animal (instincts). It is in this context that one may examine how the corporation has been used as tool in this process.

The evolution of Corporation as a business organisation was promoted by the Fabians and Labour Party functionaries in Great Britain during the early part of the last century. Economists like A.C Pigou and J .M. Keynes wanted to use Corporation as a tool for successful nationalisation of basic industries in course of gradual transition to a socialist economy. The kind of Public Corporation that they perceived as an institution to avoid political control over public utilities and, at the same time, to enjoy autonomy to take prudent decisions in the day to day functioning of the business was flawless.

Though England pioneered the concept in an ideological backdrop, the corporation has emerged differently in diverse economies. Thus, the kind of corporation like BBC in England is different from any in France, Japan, and the USA. A corporation as a legal entity with a set of objectives to run public utilities has been slowly adopted by business enterprises. The basic legal characteristics of the business corporation are: legal personality, limited liability, transferable shares, delegated management under a board structure, and investor ownership.

These characteristics respond to the economic exigencies of the large modern business enterprise. But the remarkable fact, according to Harvard scholars, is that, 'in market economies, almost all large-scale business firms adopt a legal form that possesses all five of the basic characteristics of the business corporation. Indeed, most small jointly-owned firms adopt this corporate form as well, although sometimes with deviations from one or more of the five basic characteristics to fit their special needs'.

The public Corporation or Private Corporation in India was introduced through the Companies Act 1956 and was reintroduced in 2012 with some modifications. The difference between the private limited and public limited is that the former needs 7 members and the latter can be registered with a minimum of 2 and with limited liability. The latest amendment to the Act has provided for one man company/corporation. There are other provisions like voting rights, election of chairman, nomination of auditors, etc. But there is also a provision through which the board can amend the articles and memorandum making the provisions trivial.

The registered company can allot its shares (Art 42) to private party and can call it public offer and also assign sweat shares to its directors and employees (read family members). It can buy back its own shares when it grows strong through different means to make it a family affair. Thus, the capital marketization through the corporations is one and half times that of our GDP; or Rs 13541699 lakh crores is under the ruse of few families. Out of the 1289229 registered companies, including the suitcase companies, only 872957 are in operation and a majority of them are in finance, banking, insurance, real estate, service sectors and only 22 per cent are registered as manufacturing firms. What does it convey?

It is difficult to convince some of our activist scholars that feudal characteristics prevail and sustain in an advanced capitalist system. But India, according to R.S.Sarma and others, had feudalism during 300-1200 AD. But he has qualified that his study 'does not consider its impact on social and cultural life'. There are others who claim that we had a different kind of Asiatic Mode of Production that does not necessarily correspond to that of the European feudal category. However, it is relevant to understand that feudalism as a form of governance or mode of production is related to land and the fief of a lord. The landlord under the fiefdom controls everything and exploits the workers and may develop an ideology based on faith or social bond to keep them under his control. It seems the characteristics of fiefdom sneaked into our corporate world.

A popular weekly has made an observation on a much touted corporation and the promoter as "�missed a trick by mechanically passing the baton on to each of the founders. The firm effectively closed the door to outside talent which could have taken it to the next level of success" (Semi-capitalism 17, June, 2013). Thus, all the support structures and the ethos of liberalisation in India did not show any evidence of conflict with the feudal institutions like fiefdom, caste, joint-family, guild, etc, to apply the corporate law. This warrants a critical reflection and debate for an enhanced engagement on the situation.