BY MICHAEL A . MARTORELLI
For Profit : A History of Corporations
By William Magnuson Basic Books , 2022 344 pages
Tracing “ a history of corporations ” in only 324 pages sounds like a daunting task . Tracing “ the shift of the corporation ” from “ a public entity with a public purpose ” to an organization that acts merely as “ a mindless engine of profit ” seems more achievable . Deep into his concluding chapter , William Magnuson uses those phrases to produce a useful description of this provocative work . This former corporate lawyer — now law professor and author — supports his account of the corporation ’ s evolution with profiles of an eclectic mix of organizations from ancient Rome to the present day .
The book starts slowly with a description of the public-spirited activities of the men who managed the societates in the
Republic of Rome in the first and second centuries BC . Their successors ’ greed , corruption and excessive demands for profit probably contributed to the devolution of that Republic to an Empire . Another chapter tells how Giovanni Di Bicci De ’ Medici and his son Cosimo ran their eponymous bank with unusual skill and creativity from 1397 to 1464 . But grandson Piero and great-grandson Lorenzo mixed business and politics in ways intended for their own good instead of the larger Florentine business community and allowed a competitor to force the bank ’ s closure in 1494 .
The author reminds the reader that the 1600 charter of the East India Company called for it to “ contribute to the greatness of England ,” even while it allowed its stockholders to reap the profits of the company ’ s trading activities around the world . Over time , company managers acted as if East India was its own government . Their aggressive and militaristic behavior eventually led the British Parliament to emasculate the company in 1783 , long before another generation of legislators was ready to fully nationalize it in 1857 . It ’ s an appropriate spot to cite Adam Smith ’ s well-known assertion that an “ invisible hand ” guides individuals who are pursuing their own rational self-interest to also promote the interests of society at large . But the author suggests that Smith doubted the ability of the corporation to do the same .
Magnuson is not the first to acknowledge the extraordinary accomplishment of the companies that built this country ’ s transcontinental railroads . More important for the book ’ s core premise , however , is his assertion that the executives of the Union Pacific “ turned … a national champion into a national villain .” They used the rare form of a government-issued corporate charter to finance an undertaking with an obvious public benefit while taking advantage of every opportunity to maximize their personal rewards .
The narrative picks up speed as it describes Henry Ford ’ s implementation of an effective system of mass production that nevertheless created a working environment that was “ draining , exhausting , dehumanizing and cruel .” But the book really hits its stride when Magnuson praises Exxon Corporation for being at the “ forefront of energy innovation ” and “ creating new technologies ” while at the same time criticizing it for doing “ business with dictators and autocrats ” and selling a product that was “ found to be destroying the environment .”
In another profound commentary , he criticizes KKR and the widely vilified “ slash-and-burn strategies of private equity ” while admitting that such firms “ forced big companies to adapt to a new world of shareholder empowerment .” And in an even more timely observation , he notes the uncommonly difficult challenges social media companies , such as Facebook , must address as they try to balance the competing interests of stockholders , users and society at large .
In his conclusion , Professor Magnuson gives in to his urge to offer some “ guiding principles for fixing corporations ,” i . e ., helping them blend their obligations to various constituencies that may have equal claims on their behavior , conduct and actions . It ’ s apparent throughout that the author is neither an apologist for certain corporations ’ bad behavior over the centuries , nor a firebrand who sees them as the source of all evil . Instead , he acknowledges their perennial influence and tries to understand the nuances in their purposes and objectives . One wishes more authors would do the same .
Michael A . Martorelli is a Director Emeritus at Fairmount Partners in West Conshohocken , Pennsylvania , and a frequent contributor to Financial History . He received his MA in History from American Military University .
www . MoAF . org | Spring 2023 | FINANCIAL HISTORY 39