The Honourable East India Company was chartered by Queen Elizabeth to represent the crown in all matters of trade with the nations of the far east in 1600. It was a simple beginning to what evolved two and half centuries later into the worst possible anecdote for corporate power unchecked. With its own army, it subdued the Indian subcontinent and forced China to import vast quantities of opium.
Corporations have a unique ability to transcend national boundaries. They represent opportunity as well immediate cash on the table. In a world opening up as never before they have the first foot in the door and an opportunity to create quick profits for everyone. They rarely set out to do evil, but with their unique position largely unchecked temptation lurks just behind every fair deal.
The example of the East India Company is not antique. History does not repeat, but it does rhyme.
A corporation, by strict legal definition, is any group of people acting as if one for whatever their stated purpose. This definition is broad enough to include non-profits or NGOs. In practical terms, however, it refers to a an organization which makes something and hires people to do it.
But what is the purpose of them? Recently, it’s become very popular to assume that the main purpose of a corporation is to maximize shareholder value. That is, to grow and reward those who put their money down to make it all happen in the first place.
There are many reasons to see this need for constant growth as dangerous. Most generally, it’s not sustainable outside of the rate of population increase and productivity gains, at least once the entire planet reaches a similar level of development. But more important, the view of what a corporations is, or at least why it exists, is extremely damaging to its own stated purpose. And it’s easily shown to not actually be true in practice.
The stock market has rallied for two days, with the S&P500 back at 1987 from its low of 1869. It’s still down 6.8% from its peak of 2130, set in May, (and nearly matched just a month ago) and down 3.5% for the year. It’s almost like the crash never happened, right?
Well, no. But there is a lot of good news for the underlying economy, some of which came in this week. The really good news is still out into next year, which is essentially forever to this market. We have to get over an interest rate hike, which will definitely come this year no matter what you read elsewhere, and a lot of jitters.
If you’re like most people living paycheck to paycheck, you have a simple problem at the end of the month – not enough cash. There’s nothing to be embarrassed about here – it’s a common problem that is faced by a large number of families as the economic recovery struggles on.
But if you’re an S&P 500 company, you may have a different problem – too much cash. Not precisely too much cash on hand, that is, since that’s never a problem. You may have something like cash sitting around somewhere in the world that you have trouble bringing home to make use of the way you want to.
Therein lies the problem with this economy – not that there isn’t enough to go around, but that it isn’t going around.