Question:

ASSIGNMENT DETAILS

Format: 2 pages, single spacing, and 12-point font

This assignment involves comparing two arguments in two short articles (see links below). You should think about the differences and similarities between the arguments in the two articles and then compare the strengths and weaknesses of each argument. 

Two articles:

1. The Economist (2012) The endangered public company, 19 May 2012, accessible online: http://www.economist.com/node/21555552 
2. Diamond, S. (2012) Occupy Santa Clara! Corporate personhood reconsidered, Dissent Magazine: http://www.dissentmagazine.org/online_articles/occupy-santa-clara-corporate-personhood-reconsidered

ASSIGNMENT DETAILS

Format:           2 pages, single spacing, and 12-point font

This assignment involves comparing two arguments in two short articles (see links below). You should think about the differences and similarities between the arguments in the two articles and then compare the strengths and weaknesses of each argument.

Two articles:

1. The Economist (2012) ‘The endangered public company’, 19 May 2012, accessible online:  http://www.economist.com/node/21555552
2. Diamond, S. (2012) “Occupy Santa Clara! Corporate personhood reconsidered”, Dissent Magazine:  http://www.dissentmagazine.org/online_articles/occupy-santa-clara-corporate-personhood-reconsidered

Answer:

Title: Argument comparison

The two articles under analysis in this paper are The Economist’s (2012), The Endangered Public Company by and Diamond’s (2012) Occupy Santa Clara! Corporate Personhood Reconsidered. These two articles are similar in some ways and different in others. Moreover, each has its own strengths and weaknesses in terms of the arguments made. This paper compares these two articles in terms of the arguments made as well as the strengths and weaknesses of these arguments.

In the first article, the main argument is that public companies are facing stiff competition from other forms of corporate organization, chief among them state-owned enterprises (SOEs) and partnerships (The Economist, 2012). Various examples that show that the public companies are on their way to extinction are provided. In these examples, focus is on the demise of public companies such as Enron, Global Crossing, Worldcom, Lehman Brothers, and Tyco.

According to The Economist (2012) public companies have always gained durable success in the past because of three main things: limited liability, professional management, and ‘corporate personhood’. Limited liability encourages investment from the public, professional management boosts organizational productivity, while ‘corporate personhood guarantees the survival of the company even when its founder has been removed.

In The Economist (2012), public companies are said to be in the danger of fading and becoming irrelevant in the contemporary global economy. To prove this point, statistics are provided to show that over the past two decades, the number of public companies and IPOs (Initial Public Offerings) in the West has decreased dramatically. Moreover, many other challenges appear to make survival extremely difficult for public companies. Some of these challenges include difficulties in finding qualified lawyers and accountants because of the trend towards specialization and increasing costs of hiring and maintaining them, difficulties in finding qualified directors, and numerous legal hurdles.

The main reason why public companies are finding it hard to survive today, according to the article by The Economist (2012), is that the today’s highly successful entrepreneurs are preferring to preserve a great deal of personal control. Examples in this regard include Google and Facebook, whose founders exert a lot of personal control. Additionally, many companies prefer to become Limited Liability Limited Partnerships (LLLPs) instead of public companies. In the US, some of the examples of this scenario include Sears Brands LLC and Chrysler LLC. This, according to the article, is a clear indication of “the rise of the uncorporation”.

In the second article, Diamond (2012) attempts to untangle the doctrinal confusion that he thinks surrounds the concept “corporation personhood”. In The Economist (2012) corporate personhood is considered one of the desirable characteristics of public companies since it guarantees them survival even when the company’s founder has been removed. According to Diamond (2012) the best way to untangle this confusion is through proper framing of key court decisions that the US Supreme Court made as far back in 1886 in Santa Clara County v. Southern Pacific Railroad. Diamond (2012) traces the recognition of the corporation as a legal person to this case. An analysis of the context of this case, according to Diamond, raises serious questions regarding the nature of economic organization in the modern context.

Diamond is opposed to the concept of “corporate personhood” or the recognition of the corporation as a legal person. To support this argument, he points out that not all corporations are equally powerful and wealthy. At some point, some even fail and dissolve, simply with the use of the convenience of the concept of corporate personhood. In Diamond’s view, the current understanding of corporations does not distinguish among them.

An analysis of the events surrounding the court case Santa Clara County v. Southern Pacific Railroad in the context of Santa Clara Valley, which is today known the world over as Silicon Valley, are used to demonstrate that the rationale for corporate personhood has outlived its social value and relevance (Diamond, 2012). This serves as a major strength in demonstrating the irrelevance of the concept of corporate personhood in the modern context. In this lawsuit, the conflict was between railroad capitalists and a legion of struggling peasant farmers, with some opportunist land swindlers getting into that mix in the post-Civil-War era. The relevance of this conflict is the fact that it spread across California and ultimately into the national consciousness.

At this point, it is evident that the approach used by Diamond (2012) to argue against corporate personhood is entirely different from that of The Economist (2012). In The Economist, a lot of emphasis is on comparison between public companies and alternative corporate forms such as family-owned businesses, partnerships, Real Estate Investment Trusts (REITs) and Publicly Traded Partnerships (PTPs). In contrast, Diamond (2012) analyzes the social context in which the legal battle in 1886 between the Southern Pacific Railroad and the small-scale farmers of Santa Clara Valley unfolded. Diamond’s objective in the analysis of this social history is to demonstrate that the recent generation of scholars has failed to explore how the social history relates to the modern conception of corporation as a legal person. In this regard, this authors holds the view that this concept has traditionally been held to be more significant that it actually was in the context of Santa Clara County v. Southern Pacific Railroad, even to the extent of regarding it as ‘fictional’.

This rigorous analysis of the social context of the initial use of the term ‘corporate personhood’ during the late 19^th century is the main strength of the article. In terms of focus on social history of corporate personhood, Diamond’s article seems to have more strength than the one by The Economist. On the other hand, The Economist’s (2012) main strength is that examples given to support the arguments made are wide-ranging, extending to other countries in Europe and emerging economies in Asia and not just in the US.

In The Economist, the argument that the public company is endangered is well supported, making it very strong. The author clearly demonstrates how public companies have had a difficult decade, and how the number of new public companies and IPOs has been decreasing significantly since the early 1990s. To support this argument, the author rightly gives evidence to show that during this same period, alternative corporate forms have been emerging. An example is the current scenario in the US where one-third of the country’s tax-reporting firms have positioned themselves in the category of partnerships. Moreover, it is demonstrated how policymakers have embraced these alternatives to public companies. In Britain, for example, a new category of companies has been established, known as “Community Interest Companies”. These companies issue shares as well as dividends but the reason for their existence is the promotion of social purposes.

References

Diamond, S. (2012) Occupy Santa Clara! Corporate Personhood Reconsidered, Dissent Magazine, retrieved from http://www.dissentmagazine.org/online_articles/occupy-santa-clara-corporate-personhood-reconsidered  on November 9, 2012.

The Economist (2012) The Endangered Public Company, 19 May 2012, retrieved from http://www.economist.com/node/21555552  on November 9, 2012.