Customer Reviews

The Company: A Short History of a Revolutionary Idea (Modern Library Chronicles)

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The authors, John Micklethwait and Adrian Wooldridge, have squeezed 5,000 years of business history into The Company (A Short History of a Revolutionary Idea), the newest addition to the important series, Modern Library Chronicles. I approached this particular edition was some trepidation as the subject matter seemed a little dry (there is, after all, a chapter called "The Triumph of Managerial Capitalism".) The book is more interesting than expected and is written with some humour as well as a certain amount of patience for the less business informed reader. The strong caveat, though, is that the authors do stress the triumph of the company in creating everything that is good in the world, making their case less often then I suspect they wanted to. They are honest about the bad, such as the Belgian Congo and Enron, but try to make clear that positives exist with enormous negatives. Trying to find a positive in the holocaust of the Congo is not, in fact, possible but the authors cheerfully give it a shot. Despite their obvious boosterism, this is an interesting book and a worthwhile introduction to one side of an argument.

This short, breezy history of the business corporation begins with the Dutch East India Company and ends with Enron. As befits a book by two Economist writers, "The Company" reads like an Economist special supplement: the analysis spans the globe; factoids are mixed with sweeping generalizations; interpretations masquerade as straightforward statements of fact; and dry subjects are enlivened with humor, literary touches, and insights from deep thinkers (like Coase and Chandler). "The Company" is a very good read.

Unfortunately, it doesn't treat any subject in depth. The endnotes show that the authors worked exclusively from secondary sources. It's hard to know whether the authors are as sure of their material as their cocky tone suggests: the section on well-known recent developments (mergers, corporate "unbundling," Silicon Valley, globalization, etc., etc.) is filled with debatable judgments, confidently asserted. This inevitably raises doubts about the book's treatment of distant, unfamiliar historical episodes.

One thing "The Company" does prove is that a limited-liability joint-stock company (i.e., a corporation) is a handy vehicle for amassing capital from multiple dispersed investors. Something like it would have to exist in any capital-intensive, non-socialist economy. But "The Company" also shows that the particulars of corporate form are conditioned by history, law, and culture; corporations vary radically from country to country and era to era. The Microsoft of 1995 had little in common with the I.G. Farben of 1925 but for the fact that both were limited-liability joint-stock companies.

In this regard, the authors draw a helpful distinction between Anglo-American "shareholder" corporations (operated for the benefit of owners) and German-style "stakeholder" corporations (which include workers and community representatives on their governing boards). The corporate model chosen by a nation has big implications for labor relations, investment decisions, and politics. This is a radical message for Americans who see corporations as the creations of "the marketplace" and beyond the control of the community. If "The Company" awakens American readers to the variety of corporate models to choose from, it will have served an admirably subversive purpose. Plus it's short!

Note: A new book called "Icarus in the Boardroom" covers some of the same ground as "The Company." It too is short and breezy, but it is much more sophisticated and it really unpacks the legal and economic forces that drive corporate evolution. I would recommend it over this book.

Although I would recommend this text to generalist readers seeking a (remarkably) concise introduction to history of the business corporation, I came away somewhat disappointed. There is little doubt Micklethwait and Wooldridge are correct in their claim that the corporation is now the key economic institution in Western nations. Yet, it did not have to turn out that way. As Micklethwait and Wooldridge usefully remind us, two centuries ago, leading business and economic thinkers (including the great Adam Smith) derided the joint stock company. What explains the relatively rapid development in the mid-19th century of a recognizably modern corporation and, in turn, that entity's emergence as the dominant form of economic organization?

Micklethwait and Wooldridge offer a fairly conventional answer to that question, based largely on new technologies -- especially the railroad -- requiring vast amounts of capital, the advantages such large firms derived from economies of scale, the emergence of limited liability that made it practicable to raise large sums from numerous passive investors, and the rise of professional management. Readers familiar with the work of business historian Alfred Chandler will find relatively little new in this part of the story, although Micklethwait and Woolridge's treatment has the advantage for generalist readers of being considerably more accessible than is most of Chandler's work. Instead of offering any novel historical analysis, Micklethwait and Wooldridge's principal potential contribution (albeit one they failed adequately to realize) is the normative thesis to be derived from the historical account.

In their introduction, Micklethwait and Wooldridge's lay out a claim that will be familiar to readers of Michael Novak's work (surprisingly, however, they seem unaware of his seminal work). Like Novak, Micklethwait and Wooldridge argue not only that the corporation is one of "the West's great competitive advantages," but also that the number of private-sector corporations a country boasts is a relatively good guide to the degree of political freedom it provides its citizens. (xx) Unfortunately, this insight goes nowhere.

The normative claim is entirely plausible. The rise of modern corporations did more than just expand the economic pie. The legal system that facilitated their rise necessarily allowed individuals freedom to pursue the accumulation of wealth. Economic liberty, in turn, proved a necessary concomitant of personal liberty-the two have almost always marched hand in hand. In turn, the modern public corporation has turned out to be a powerful engine for focusing the efforts of individuals to maintain the requisite sphere of economic liberty. Those whose livelihood depends on corporate enterprise cannot be neutral about political systems. Only democratic capitalist societies permit voluntary formation of private corporations and allot them a sphere of economic liberty within which to function, which gives those who value such enterprises a powerful incentive to resist both statism and socialism. As Michael Novak has observed, private property and freedom of contract were indispensable if private business corporations were to come into existence. In turn, the corporation gave liberty economic substance over and against the state. Regrettably, after laying it out, Micklethwait and Wooldridge fail to pursue this thesis. Instead, their book lapses into a rather sterile historical description.

There are few creatures more vilified in today's world than corporations. For some, companies are the instruments of evil, they exist to profit at the expense of ordinary people, and their chief executives are defamed for their greed and ambition. All the same, most people live off the checks they receive from those evil beasts; and, being the CEO of a large company offers comparable prestige with other esteemed professions.

Wrestling with these competing images of corporations is part of what "The Company" aims at. John Micklethwait and Adrian Wooldridge, both of The Economist, embark on an ambitious project to show that the corporation lies at the heart and center of organized societies-more so than the state, the commune, the political party, the church, and others.

Having put modesty aside, the authors deliver on their promise with great skill, both literary and scholarly. All pervasive in their narrative is a deep sense of historical perspective-of contrasting the companies of today with those of the past. This need of putting the present in context is extremely valuable in canvassing the role that corporations (and particularly multinationals) play in the world today.

Several themes emerge in this historical journey. The first is the evolution of the company itself through a continuous political debate about its role and place in society. A second charts the different attitudes that societies have had towards companies; in particular the authors focus on the United States, Britain, Germany and Japan.

At the heart of this book is the dialectic between society and company; the Virginia Company, for example, effectively introduced democracy in America in 1619. This helps explains why Americans have been more receptive to companies that have other countries. This is one of countless examples in the book that chronicle the immense impact that companies have had the world over.

"The Company" not only explains the historical arguments that have been front and center of the debate about the role that companies should play, but it also captures the timeless forces that have shaped, and are likely to keep shaping, the debate in the future. Certainly a book no one would like to miss.

Here we have an examination of what seems to be, at first glance, a less-than-exciting subject: the limited-liability joint-stock company. Ah, but that first impression is soon proven false by what indeed is a fascinating, at times riveting (albeit brief) history of what Micklethwait and Wooldridge correctly suggest has been and remains, since the Companies Act of 1862, "the basis of the prosperity of the West and the best hope for the future of the world." Soon becoming the single most powerful economic power, the limited-liability joint-stock company combined the three big ideas behind the modern company: "that it could be an artificial person," with the same ability to do business as a real person; that it could issue tradable shares to any number of investors; and that those investors could have limited liability (so they could lose only the money they had committed to the firm)."

Although Micklethwait and Wooldridge do indeed provide "a short history of a revolutionary idea," their book is remarkably comprehensive as it traces the evolution of commercial structure from merchants and monopolists (3000 B.C. -- 1500) through imperialists and speculators (1500-1750) and the "prolonged and painful birth" of the limited-liability joint-stock company (1750-1862) before shifting their and the reader's attention to the rise of big business in America (1862-1913), the rise of big business in Britain, Germany, and Japan (1850-1950), the triumph of managerial capitalism (1913-1975), and what they characterize as "the corporate paradox" (1975-2002) before examining "agents of influence: multinationals (1850-2002) in the final chapter. All this, and done very well indeed, in less than 200 pages! For those interested in further study of any/all of the periods and subjects they discuss, Micklethwait and Wooldridge provide an exceptionally informative "Bibliographic Note" section, followed by all of the footnotes in which additional recommendations are included.

Congratulations to Micklethwait and Wooldridge on what I consider to be a brilliant achievement, one which combines scholarship of the highest order with narrative skills worthy of Austen, Thackeray, and Dickens.

This short book was simply excellent. The authors, who both work at "The Economist" fill this volume with a pithy, well researched, global history of the joint-stock corporation. They take us from early partnership agreements in 3000BC through the rise of big business in America, Britain, Germany and Japan, to the emergence of powerful multinationals.

The authors definitely have very slight, pro-corporation slant, but not annoyingly so. They simply emphasize that corporations have improved productivity and lifted standards of living, and leave the many anti-corporate arguments to others. But given that the corporation has risen to be a such a large influence in society, eclipsing states, politics, and church, understanding the history of the corporation may be important as knowing the history of our nation. I found the topic interesting, and the book to be well researched, insightful, and well written. Therefore, I recommend this book highly.

The book covers a lot of ground, and below is a summary of some of the topics covered.

The pre-history of the corporation begins with the Sumerians & the Assyrians, who negotiated contracts and had partnership agreements. The origins of more formal corporate law, however, can be traced back to the Romans. By the 16th century, large corporations such as the East India company & Hudson Bay company existed; these were monopolies chartered by royal governments to grab the riches of the new worlds opened by Columbus, Magellan, and Vasco da Gama. In this era, few corporate charters were granted by governments. Furthermore, those corporations were restricted to the task they were chartered for. Typically, these were for public projects such as canals, toll bridges, turnpikes.

All that changed in the mid 1800's. With the landmark Joint Stock Companies Act in 1856 in Britain, companies didn't have to be chartered by the state, but could incorporate simply by registering with the state. Corporations were free to do as they wished. They also were granted limited legal liability, so investors could be held liable for no more than their investment. This landmark legal action was the start of the modern corporation.

Limited liability proved to be immensely attractive to investors, and some said it was the greatest single discovery of modern times. Indeed, it attracted a flood of capital to the first major corporations, such as the railroads. The railroads were the first modern businesses; they required huge amounts of capital, and large armies of managers to administer an entire transportation network. The ability to sell shares allowed capital to be collected, and railroad shares this drove the growth of the NY Stock exchange. Also during this period, large corporations began to merge, and/or to be held under an umbrella corporation using laws for "trusts." The monopolistic practices of these trusts, like Standard Oil Trust, led to modern anti-trust laws.

Corporations themselves began to evolve. Improved management gave rise to "managerialism," and the rise of loyal "company men" and professional managers. Business schools began to spread. The 1950's-60's was the heyday of the "company man," who valued the traditions of stable office life, promises of a status tokens such as a better parking place or the gold watch upon retirement, and who would work hard to achieve them. Critics worried that they were "other directed" rather than "inner directed," too worried about fitting in rather than following their own inner compass or entrepreneurial urges.

Today, that corporate environment is gone. In the 90's, the youthful entrepreneurial, meritocratic Silicon Valley held the country's attention, and tie-less entrepreneurs in start-up companies became our heros, not men in gray-flannel suits in blue-chip companies. Companies slimmed down, focused on their "core competencies" and began to fight foreign competition, such as the Japanese. Other companies grew to be huge multi-nationals that spanned borders. By 2000, 37 of the top 100 economies of the world were corporations; in fact, Wal-Mart's profits were larger than the GDP of Peru.

The financing of modern business also played a key role in their history. Today, institutional investors, typically large pension funds, own over 60% of all public company shares. Their short-term focus drives a short term-focus for corporate performance. In the 1980's, some companies tried to escaped this pressure and make enormous profits for their owner-managers by going private during the leveraged-buy-out craze. Years later, the technology boom and the strong stock market led to a heyday of "easy money" for public companies, which weakened checks and balances & corporate governance at those companies. Eventually, many managerial abuses and accounting fraud were found, such as those at Tyco, WorldCom and Enron.

Finally, the authors discuss a recurring question that comes up as they discuss corporate history: "For whose benefit is the company run? For stockholders only? For the workers? For society as a whole?" One early argument was that since governments granted corporations the privilege of limited liability, that they had some obligation to the public. Around 1900, the German corporate legal environment emphasized cooperation & a company's social role rather than competition. But in the US in 1916, the Michigan Supreme Court ruled that a business works primarily for the profit of the stockholders. So despite the fact that protesters today cry for corporations to become more ethical, honest, humane, and socially responsible, corporations are legally mandated to make money for their shareholders as a primary goal.

This legal history is interesting, but unfortunately some legal history has been omitted; this is my one small criticism of the book. There is some debate about corporate "personhood" that anti-corporate protestors often cite. In the eyes of the US legal system, a corporation is a dis-embodied person, with associated rights, privileges, and obligations. Corporate lawyers have often used the 14th amendment to protect corporate interests, and critics point out that this distorts it's intent, as it was originally directed at protecting the rights of former slaves. This entire topic not discussed in this book, though it's an important legal issue in the history of corporations.

Nevertheless, overall, I thought this book was enjoyable, informative, readable, and well researched. I highly recommend it.

Although I would recommend this text to generalist readers seeking a (remarkably) concise introduction to history of the business corporation, I came away somewhat disappointed. There is little doubt Micklethwait and Wooldridge are correct in their claim that the corporation is now the key economic institution in Western nations. Yet, it did not have to turn out that way. As Micklethwait and Wooldridge usefully remind us, two centuries ago, leading business and economic thinkers (including the great Adam Smith) derided the joint stock company. What explains the relatively rapid development in the mid-19th century of a recognizably modern corporation and, in turn, that entity's emergence as the dominant form of economic organization?

Micklethwait and Wooldridge offer a fairly conventional answer to that question, based largely on new technologies -- especially the railroad -- requiring vast amounts of capital, the advantages such large firms derived from economies of scale, the emergence of limited liability that made it practicable to raise large sums from numerous passive investors, and the rise of professional management. Readers familiar with the work of business historian Alfred Chandler will find relatively little new in this part of the story, although Micklethwait and Woolridge's treatment has the advantage for generalist readers of being considerably more accessible than is most of Chandler's work. Instead of offering any novel historical analysis, Micklethwait and Wooldridge's principal potential contribution (albeit one they failed adequately to realize) is the normative thesis to be derived from the historical account.

In their introduction, Micklethwait and Wooldridge's lay out a claim that will be familiar to readers of Michael Novak's work (surprisingly, however, they seem unaware of his seminal work). Like Novak, Micklethwait and Wooldridge argue not only that the corporation is one of "the West's great competitive advantages," but also that the number of private-sector corporations a country boasts is a relatively good guide to the degree of political freedom it provides its citizens. (xx) Unfortunately, this insight goes nowhere.

The normative claim is entirely plausible. The rise of modern corporations did more than just expand the economic pie. The legal system that facilitated their rise necessarily allowed individuals freedom to pursue the accumulation of wealth. Economic liberty, in turn, proved a necessary concomitant of personal liberty-the two have almost always marched hand in hand. In turn, the modern public corporation has turned out to be a powerful engine for focusing the efforts of individuals to maintain the requisite sphere of economic liberty. Those whose livelihood depends on corporate enterprise cannot be neutral about political systems. Only democratic capitalist societies permit voluntary formation of private corporations and allot them a sphere of economic liberty within which to function, which gives those who value such enterprises a powerful incentive to resist both statism and socialism. As Michael Novak has observed, private property and freedom of contract were indispensable if private business corporations were to come into existence. In turn, the corporation gave liberty economic substance over and against the state. Regrettably, after laying it out, Micklethwait and Wooldridge fail to pursue this thesis. Instead, their book lapses into a rather sterile historical description.

quick read on the history of the firm in general. recounts milestones and significant events as well as some interesting anecdotes of which many would be known to the general historian and some more that may not. i was expecting more analysis but given the quality of the data (that was extremely well-cited in terms of sources) its a very good value.

"The Company" covers the story of the joint stock company fRom its antecedents in the ancient world to its more modern incarnations. It is a combination of a study of the nature of business organizations and the history of their effects on the various economies and cultures which they have served. This book goes through the businesses of Rome and other ancient societies. The rise of the family firms of Renaissance Italy is shown as playing a major role in the flowering of culture. The stagnation of Chinese and Islamic cultures is explained as resulting, at least in part, from their failure to produce a long term, stable corporate structure. The stories of the colonial companies, such as the East India company, make for very interesting reading. The role of scandals in shaping the form of corporations from the Mississippi Bubble to Enron show that they have consequences beyond the affected companies and industries.

Throughout this book the authors do a good job at comparing and contrasting corporate structures in major countries such as the United States, Great Britain, Germany and Japan.

The various goals of the company, such as earning a profit for shareholders, contributing to the welfare of its employees and society and the development of the state are all considered. The goals of companies in different countries and times are contrasted. The sections on the interaction of companies and government makes for fascinating reading.

This book is nicely researched and well presented- not too long (not padded out) and not too short (despite its title).

I finally understood the origin of the US term 'Trust' as in 'Anti-trust'.

It was also interesting to see the role the Railways (Railroad) had played in causing the Company to evolve, from the limited-time partnerships of the Sailing Ships to the `ownership' by the Pension Funds.

Only one irritation - the sub-editor must have been asleep reviewing the proofs (in my UK edition anyway). Each page contains genuine hyphenated terms such as 'joint-stock' and 'Anglo-Saxon', but there are rogue hyphenations such as in 'chap-ter', 'Car-negie', 'custom-ers', 'Gas-kell', and you keep having to re-read them to see what they mean? I found them in 5 different chapters, so its not as if only one piece of text was added/removed and threw out the pagination?