What Is Corporate America?
What is corporate America? Over the years, the phrase “corporate America” has been utilized as a derogatory phrase to describe large businesses and corporations within the United States. This phrasing generally stems from the overall consensus by most Americans that corporations are inherently greedy, looking to maximize profits at the expense of the environment, their employees, and the larger benefits of society.
This article is going to deep dive into what corporate America really is, why the designation has stuck, and what some companies are doing to distance themselves from the term. In-addition, we’re going to look at why some companies do look to maximize profits above all else.
However, I am not going to make a judgment call or opinion on whether or not corporate America is inherently good or evil. That is not my call to make. Our diverse group of readers will have had many differing interactions and dealings with corporate America. Some may have been fantastic, while others were less than stellar. At the end of the day, corporate America has entrenched itself in our world and how we as a society function.
A (Brief) History of Corporations
In theory, a corporation is simply a group of people or a company that provides services or goods to individuals or other companies and corporations.
Corporations are generally divided into for profit or not-for-profit. The former indicates that a corporation looks to have an excess of revenue after costs are paid out. These costs include, but are not limited to, wages, benefits, inventory, lease and rental obligations.
The latter, not-for-profit corporations, typically look to further or advance a particular cause or foundation. These causes and foundations can vary, from religious to scientific research to advancing environmental awareness.
Corporations are typically owned and controlled by its members. In larger corporations, a board of directors will appoint a Chief Executive Officer (CEO) to oversee the vision and management of the company. For profit corporations are, by nature, interested in maximizing shareholder value.
In the 15th century, the rise of mercantilism began to take root and was the dominant economic and national thought. Mercantilism looked to increase a country’s exports and reduce imports. In doing so, a country would be able to reduce account deficits or increase their overall account surplus.
The theory of mercantilism urged national constraint and self-reliance. At its core, mercantilism was a zero-sum game, made-up of winners and losers on a global scale. An increase in deficit by one country meant a decrease in another’s. As evidenced by a statement in Discourse of the Common Weal of this Realm of England:
“We must always take heed that we buy no more from strangers than we sell them, for so we impoverish ourselves and enrich them.”
The mercantilist theory began to give way to the theory of free trade and a laissez-faire policy from the government. This policy follows that a government will not discriminate or interfere with imports or exports from their country.
Free trade policies look to promote the trade of goods and services between countries without taxes or tariffs. In addition, free trade policies look to minimize trade-distortions between countries and allow for a more unregulated access to markets and market information.
As free trade policies were being enacted, so too was the definition of a corporation, as defined by Stewart Kyd who was the author of the first treaty on corporate law in England.
He states that a corporation is simply:
“A collection of many individuals united into one body, under a special denomination, having perpetual succession under an artificial form, and vested, by policy of the law, with the capacity of acting, in several respects, as an individual, particularly of taking and granting property, of contracting obligations, and of suing and being sued, of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the design of its institution, or the powers conferred upon it, either at the time of its creation, or at any subsequent period of its existence.”
The theory of free trade and laissez-faire policies eventually gives way to a free market theory. A free market system is one in-which the prices of goods and services are self-regulated. Essentially, the market and the consumer, entity, company, or corporation purchasing the good or service will determine the price based on their willingness to. If a good or service is priced too high, no consumer will purchase it. Priced too low and it will sell out quickly, leaving no profit.
You can read further about free markets here, if you’d like.
Free market systems have evolved to certain forms of capitalism, which is the dominant economic theory in the United States. Capitalism is an economic system which is “based on private ownership of the means of production and their operation for profit.”
In essence, capitalism allows for private property and the accumulation of capital. This accumulation of capital is the implicit purpose for all or most production. Accumulation of capital can be done in a variety of ways, including trading time or labor for wages or utilization of private capital for further production, which can be sold on the open market.
In addition, in a capitalist system, individuals can invest their capital to make a profit. This profit motive is most likely found in for profit corporations, which look to increase shareholder value.
What Is Corporate America?
The above information lays the groundwork for modern day American capitalism and corporate motive. In essence, the corporate motive has become the maximization of corporate wealth and profit for shareholders through legal means. Though illegal means are utilized, and somewhat prevalent in certain industries, large, multi-national corporations typically err on the side of caution to avoid regulatory suspicion and inquiry.
Corporate America in its purest definition is simply a corporation which echoes a capitalistic ethos of profit and capital accumulation above all-else. This ethos is intrinsically tied to American capitalism, where it has been fostered and grown at an alarming rate.
Though corporate America is not inherently wrong or evil, the disdain stems from the belief that short-term profit motives disincentivizes future conservation and growth. That is, in looking to maximize shareholder profit and capital, corporate America takes measures which are inherently unethical, often without punishment.
Corporate America, naysayers will argue, prizes short-term gains above the welfare of employees and the society which they preside in. It pushes for greater employee productivity, while looking to reduce compensation and benefit packages. It lays-off and fires full-time employees and outsources work to lower cost countries. It is a system in which a Chief Executive can be paid 278 times more than an individual employee in a year. In which 30% of employee’s working full-time will still be on welfare and will need governmental assistance.
The disdain for corporate America isn’t in the corporation or the need to make a profit, rather it is that the profit motive has become the only motive. That capitalism has become untenable and run amok.
On the flipside, proponents of a capitalistic system and of corporate America will argue that the accumulation of wealth is a strong incentive. A more profitable corporation lifts all employees and generally benefits those working there. The free market, they argue, forces individuals to utilize their own abilities and skills to advance in their careers.
Similarly, corporate America can be a rewarding system when done correctly. A smart, hard-working, dedicated individual can climb the career-ladder and advance their career. They can reach the upper rungs of a company and accumulate wealth for themselves. They can work through their own merits to reach the upper echelons of a company. Within a capitalistic environment, they can take those skills and create a company for themselves.
Corporate America, for-better or for-worse, has reshaped the relationship between employer and employee and corporation and society. But the understanding of corporate America should be delved just a bit further.
Within corporate America, there are a plethora of differing and diverging priorities and wants. While being aligned to the objectives of the company, there are competing interests and wants amongst business units and departments. This creates its own level of competition and incentive. This competition can also be used as a definition of corporate America, one that is competitive, combative, and departmentally selfish.
The context is important. When someone speaks of corporate America, are they speaking of their role within a department or of large, multi-national organizations? Corporate America is simply a catchall phrase that is used to talk both about the intricacies of interdepartmental wants, as well-as large corporation actions.
But most companies and large corporations are not evil. Though wrong and bad behavior does occur, many times it is not a managing principle of the company. As-such, with the derogatory nature surrounding corporate America, many corporations are taking strides to better their own behavior and distance themselves from the nomenclature.
Companies have begun to pull back on CEO compensation and pay structure. They have begun offering tuition reimbursement programs for employees saddled with student loan debt. They have taken a more active and aggressive stance on environmental and LGBTQ issues and rights.
Companies and large corporations are becoming more aware of the needs of society and the global population. As younger employees begin to enter the workforce, they are looking to join companies that are not only profitable but are also caring and pushing for better corporate citizenry.
Corporate America is a diverse makeup of differing viewpoints, priorities, wants, and needs. But all corporations are made-up of people and individuals. Though corporate America has become synonymous with large, evil corporations who pursue profit above all-else, the tides are beginning to shift. Corporations are looking to become better global and domestic citizens and thinking about the long-term consequences of short-term profits. Though there is some ways to go, at least we’re now beginning to make some headway.