III.

Corporate Characteristics

Most corporations are private; that is, they are owned through shares held by private individuals. Shares are traded in organized markets such as the world's stock exchanges. Public corporations are owned by governmental bodies.

The majority of corporations are small, but in practice a few giant corporations dominate vast sectors of the global ecomomy, accounting for much of world economic output.

In view of the growing importance of corporations, society is faced with three major problems. First, the growth in corporate size has brought an increasing separation of control from ownership. In large firms the shareholder (and nominal owner) no longer exercises effective control; actual control rests with management, which tends to be self-selecting and responsible only to itself. Second, the size of many corporations gives them economic power, a development that permits escape from the discipline of the competitive market, because large corporations have substantial control over the prices charged for the goods they produce. Finally, society has not been wholly successful in making certain that corporate performance serves the public interest as well as the interests of owners and managers. Competition laws may prevent the emergence of outright monopoly, but they do not guarantee fair and equitable business competition.

These problems, present in the developed economies, have become more acute with the growing number and power of multinational corporations. The multinationals, many of which are American, are business firms whose sales, work force, production facilities, and other operations are worldwide in scope. They represent the latest development in the continuing growth of corporate organization. Their power to create wealth on a worldwide scale means that multinationals are likely to remain a dominant force shaping the world economy far into the future.