Mitt Romney, facing a rowdy crowd on the Iowa hustings, opened a rhetorical can of worms by declaring, "Corporations are people, my friend." "Really?" say the Democrats, questioning both Romney's grasp of the dictionary and his grasp of politics. So just what, really, is a corporation?
According to reference.com, "A corporation is a legal entity that is created under the laws of a state designed to establish the entity as a separate legal entity having its own privileges and liabilities distinct from those of its members." Members can be people, or other corporations. But the key point is that the legal purpose of a corporation is to be separate and different from its members.
A corporation is born when a state gives it a charter. It dies when the charter is revoked by the state. A corporation is a creature of the state for its entire existence.
By contrast, people are not born just because a state issues a birth certificate. We don't die when the state issues a death certificate. Rather, these documents show that the state acknowledges that a person came into and out of earthly existence. The person is primary; the state is subsidiary.
Our system of government starts with the notion that the state exists and has power only because the people make it so. "Governments are instituted among Men, deriving their just powers from the consent of the governed," wrote Thomas Jefferson in the Declaration of Independence. He put into grand language a thought that runs deep in Western philosophy. Jefferson found that idea in the work of Locke, Berkeley, Hume, and even Machiavelli. Book II Chapter LVIII of Machiavelli's masterwork, Discourses on the First Ten Books of Titus Livy, bears the title "The People are Wiser and More Constant than a Prince."
People come first. People create states. States create corporations.
A well-run corporation considers a wide range of "stakeholders": people or entities with an interest in how the corporation behaves and performs. The term means to show that a corporation matters to more than its owners (shareholders). A corporation matters more immediately and more significantly to employees and customers. A corporation matters to its suppliers, distributors, and business partners, whether they are people or other corporations. Finally, a corporation relates to the communities where it does business.
Doing business is all about people. John Henry Patterson, founder of NCR, had a sign over the employee exit that read, "Our most important asset walks out these gates every night." To remind ourselves that every great business is built on the loyalty of repeat customers, we had coffee mugs that read, "Our last customer is more important than our next customer."
I had a wonderful mentor who used to tell me that everything accountants call an asset is really a liability. Ship inventory before it rots; collect receivables before they welsh; use equipment before it's obsolete. The real assets of a corporation, the things that create new wealth, are "people, ideas, and relationships." Of course, it takes people to have ideas, and relationships are between people. So it boils down to people, people, people.
A corporation is all about people. But it is not a person. It is a legal entity, created by people, run by people, to serve people. When management forgets this, a corporation may linger, and even do a lot of damage. But ultimately, such an unlucky corporation loses its reason to exist.