What questions typically emerge when one thinks of a corporation? We often think of ownership, but rarely do we apply our minds as to what a corporation is and whether in its conceptual design and operation the intention was meant for it to be owned as is generally perceived.
How is a corporation created? We know that a corporation is a legal construction and any person can give it birth in terms of the law. Accordingly, a corporation cannot exist outside the framework of the rule of law.
Like a human being, a corporation is incapable of bringing itself into existence. It is created by persons who are allotted shares being a divided interest in the company, which evidences a security, rather than an ownership interest in the entity so created.
I have often observed that the world is full of educated, but illiterate people — of which I am happy to count myself as one.
I have held the view that companies are owned by shareholders, but having invested time and effort to interrogate this issue, I have come to the inescapable conclusion that it is important for the continent’s development and prosperity that the question of the relationship between citizens and shares as property be addressed in favour of the majority poor.
The commonly held view is that shareholders do own and control corporations through the instrumentality of directors who are often erroneously perceived to have a duty to the appointing authority rather than the corporations they are appointed to serve.
In post-colonial Africa, the debate has naturally taken the content and context of ownership as the characteristics of a colonial system in terms of property relationships have proved difficult to alter. In the face of sustained poverty, it has not been difficult to imagine a causal link between poverty and conspiracy of the holders of shares in corporations who are not only invisible, but generally for historical and self created reasons foreign domiciled.
Once created, a corporation acquires its own personality and a record is kept as required by law indicating its birth number. Unlike a natural person, it can have perpetual existence and subject to the limitations inherent in its corporate nature have the capacity, rights, powers and privileges of an individual.
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How then can this juristic person be perceived to be owned by holders of shares? What we do know is once a person is born, he or she acquires his or her personality. Even parents (shareholders) are barred to terminate the life of their offspring.
Equally, corporations own themselves like human beings do in any democratic constitutional order. If it was the intention of the founding fathers of corporations that holders of shares own them, then surely they could have called such persons share owners rather than shareholders.
For in calling the parents of corporations, shareholders, there must have been recognition that such persons only had a link to the corporation limited by the shares held and the corporation had its own identity separate and distinct from the holders of shares.
Each natural person although incapable of self-creation acquires his or her own brand and identity to the extent that it would be foolish to suggest that parents own their offspring. What is the significance of investing in knowledge about corporations and their operation? To the extent that shareholding has been blamed for the conduct of corporations since the first corporation came into existence it is important for us to invest in the bank of knowledge about institutions and relationships that evolve from their creation and operation.
It is a legal requirement that corporations be registered in the jurisdiction they operate. Whether the parents (shareholders) are domiciled in the jurisdiction or not, it is the corporation that is conferred citizenship rights in the place of incorporation. If this is the case, how then is it possible that we can classify companies by the identity and domicillum of their shareholders? It is legally inconceivable that corporations like natural persons can be given the identity of their parents.
Notwithstanding, a view is generally held that if one’s parents are, Russian for example, the children will always be Russian. In the case of natural persons, we know that being born in Mali for example does not make one a Malian, rather anyone depending on the constitution of Mali can be a Malian.
Once citizenship is acquired whether through birth or naturalisation, there is and should be no distinction between the rights and obligations of persons born in the country (indigenous) and those born elsewhere.
With respect to corporations, it is and should ordinarily be irrelevant as to who is the shareholder given that the operations of all companies incorporated in particular jurisdiction are governed under the same laws regardless of where and who holds the shares in the company.
If there is a speed trap, for example, it is common cause that regardless of the nationality of the driver, the law will and should apply equally. Corporations registered in a country are subject to the same fiscal regime regardless of the status of the shareholders.
If this is the case, how then are empowerment initiatives to be located in the constitutional and legal context? A corporation can only remain in existence if it serves a commercial purpose from which it is able to generate from a series of voluntary contracts income that is in excess of the costs incurred in providing the service or in the production and distribution of goods sold.
It is and should be self-evident that no one goes into a supermarket, for example, merely to do business with the owner. Rather we all visit these institutions to buy and not to admire goods. When one is at the point of sale, the last thing one thinks of is the shareholder of the store for what is important is the price and quality of the goods to be purchased.
If wealth is accumulated through these voluntary exchanges characterised by minimal friction how then can a third party have or create a legitimate interest in providing a voice complaining about any alleged primitive accumulation as many uninformed commentators would like to describe the unintended consequences of a market system?
Based on the above, all corporations that are registered in a country ought to have equal protection of the law and yet this is not the case as such thinking is not a monopoly of State actors only.
A society that treats its citizens, whether natural or juristic, equally, has better prospects of delivering the promise to its people than societies that invest in segregation and selective application of the law. Once it is accepted that corporations are merely instruments of mankind to serve a purpose, it is important that this idea be critical in informing the choices and actions of not only State, but also non-State actors.
By focusing on parentage, the role of corporations in advancing human progress and meeting obligations in the jurisdiction of incorporation may be undermined to the detriment of prosperity. Does Africa need corporations to deliver the promise?
Human beings are perishable whereas corporations can remain in perpetual existence as long as the market allows. Accordingly, the corporation is just a vehicle that can be used by all who contribute value to it. Even people contribute value although they may not work for the corporation.
Such value is and ought to be conferred by the State through service delivery for which compensation comes in form of taxes.
However, many post-colonial African states look at corporations as evil and parasitic without paying any regard to the transfer and exchange of value that should be inherent and self-evident in the fiscal domain.
In many countries, it is not unusual that people pay taxes and yet receives no commensurate services. Notwithstanding, governments that fail to discharge their obligations are often the most vocal in complaining about corporate greed and vice. Why can’t governments behave as normal and grateful parents in relation to corporations?
The ignorance about the dynamics of the inherited corporate civilisation and its rules is so well established and, therefore, it would be naive to expect that investment in formal education in and out of itself can cure the disease.
Yesterday’s freedom fighters are today Africa’s leaders, but what is noticeable and unmistakable is the absence of knowledge and where it exists it’s sharing about the institutions and their relationship with man.
By taking a simplistic approach to shareholding and ownership we invariably condemn the very instruments that can perpetuate human heritage to the limitations imposed by human life and existence. So when the shareholder expires what often happens is that the corporations associated with him or her also die.
It must be common cause that human beings are incapable of owning in the commonly understood sense anything in life as the material objects they often get associated have a life or ought to have a life of their own.
This being the case, is it therefore, not ironic that so many people devote so much investment and energy to the ownership question?
We all don’t want to die and yet death is inevitable.
To suggest that in life focus must be directed elsewhere as God would have wanted and that the sole purpose of life is not accumulation, then out of service abundance will no doubt come.
About the Author Mutumwa Mawere is a businessman based in South Africa. He writes in his personal capacity.
