Corporations and Labor Organizations

As we discussed in the previous tutorial, sole proprietorships and partnerships tend

to lack the resources required to carry out huge, expensive production.

This is where the concept of the corporation comes in.

A corporation is a complex business organization classified as a legal entity, which is frequently

owned by individual stockholders, each of whom has limited liability for its debts.

If a corporation were to issue 100 shares of stock, and you bought one share, you would

own 1/100th of the corporation.

A sole proprietorship has no legal identity outside of the owner.

A corporation, however, has a completely separate identity from the identities of its owner

or owners.

So when a sole proprietorship or partnership becomes incorporated, it becomes its own legal

business structure which the owners can use to conduct business.

A corporation can then decide to issue stock, essentially selling a certain percentage of

their profits.

Being a shareholder of a corporation means one does not carry personal responsibility

for the corporation’s actions.

Shareholders can only lose the amount of money they have invested in the business, but they

can gain a lot of profit if the business does very well.

The business itself benefits by being able to raise lots of money by selling shares on

the stock market, which we will investigate in more detail later in the series.

When a corporation has its headquarters in one country but branches out into other countries,

it is called a multinational corporation.

Multinational corporations often yield tremendous power over both politics and culture in the

countries where they do business.

Now, just because a business is successful, it doesn’t mean its workers are happy.

Workers who feel they are paid too little, work too many hours, or work in unsafe conditions

can seek leverage against the businesses they work for by organizing to form labor unions.

An individual worker may not have the power to change how a business acts, but by joining

forces, they can actually get their business to make reforms.

Unions first formed in response to changes in working conditions brought on by the Industrial

Revolution of the late 1700s and early 1800s.

Union members quickly found an effective strategy to get their employer to address their demands.

That was the strike, which is simply workers all simultaneously deciding not to work.

If enough workers go on strike, it can drastically reduce a business’s production.

For this reason, strikes can be very effective.

Another effective tool for unions is collective bargaining, in which a union and the management

of a business meet to negotiate a fair contract.

Unions can also provide legal support to workers.

Despite all of this, union membership has declined dramatically around the world in