The emergence of corporate identity--Is Social Enterprise Sustainable?--III.B

The diffusion of the emergent civic partnership from the state to private corporations is significant for reasons that go beyond historic curiosity.  It is this very period, from the groundbreaking social theory of the Scottish Enlightenment to the first modern corporation statutes, that formalizes the hybrid structure of contemporary corporate identity, from the private corporation as a ubiquitous legal structure to the commercial brand.  

As with all forms of the civic partnership extending back through Aristotle to the religious state, private corporate identity arose a means to model emergence and to use it as a tool.  As an organizational medium it exists on a continuum with art, music, dance and other modes of expression that utilize rules, connections and modes of distinction to create novel patterns.  Viewed from the global perspective these forms appear to be a whole unto themselves; art for art’s sake transcending the mundane is but a more poetic analog of a corporate brand that is legally distinct from its shareholders, managers and patrons.  At the same time, all of these forms consist of separate elements that viewed in themselves are routine—the articles and bylaws of a corporation may seem mechanical and soulless on their face, but they play the same role in generating a transformative unity as musical notes on lined paper or and the mathematics of linear perspective.  

The connection between emergence and corporate identity was more apparent to previous generations of legal scholars, who lived in an age before hyper-specialization and thus were more familiar with the arts and metaphor.  The paradigmatic expression of this link was the metaphor of corporate personality, an image now dismissed by reductionistic corporate academics.  What the present generation has lost by discarding this language as a mere fiction is the central role of fictio—creative art, from the Latin for making or shaping—in the culture of contemporary entrepreneurship.  

Far from being obsolete, Blackstone’s paradigmatic  description of the law of corporate personality is the modern analogue to Aristotle’s koinonia politike—together they function as the Demotic and Greek in the Rosetta Stone of corporate hieroglyphs. Like his predecessors, Blackstone used metaphors to model a phenomenon that we would now describe as an emergent identity, a pattern with properties distinct from those of its separate parts.

As Blackstone indicates, the corporation arose as a counterpart to the commercial partnership, which under the law of the day was merely an aggregate of its constituent individuals; once a partner left the partnership dissolved.  What the architects of corporate form discerned was that the corporation creates an identity that its distinct from those associated with it at any one point in time—it is “one whole out of many persons,” because
 

when they are consolidated and united into a corporation, [the members] and their successors are considered as one person in law: as one person, they have one will, which is collected from the sense of the majority of the individuals: this one will may establish rules and orders for the regulation of the whole, which are a fort of municipal laws of this little republic; or rules and statutes may be prescribed to it at its creation, which are then in the place of natural laws: the privileges and immunities, the estates and possessions, of the corporation, when once vested in them, will be for ever vested, without any new conveyance to new successions; for all the individual members that have existed from the foundation to the present time, or that shall ever hereafter exist, are but one person in law, a person that never dies: in like manner as the river Thames is still the same river, though the parts which compose it are changing every instant (Blackstone, 1765-69).

Whatever the additional utility of the corporation and its analogs, this ratio of difference between whole and parts is the root of its coherence.  The corporation’s name gives it a distinct identity apart from its individual members; the rules contained in its charter documents work together to create the higher collective order that members “in their natural persons . . . could not have had” (Bk. 1, Ch. 18).

Since Blackstone’s day the image of the corporate person has become a cliché.  The intellectual fascination with corporate personality evident in the works of Hobbes, Blackstone and other writers centuries ago has largely disappeared; while corporate personality may be a recurring image in popular culture and practicing law, theorists tend to dismiss it as little more than a distracting folk metaphor. However, as Marshall McLuhan observed more generally in his analysis of cliché as archetype, this is precisely what makes corporate identity so influential. Corporate form is effective in propagating an identity defined by the difference between whole and parts precisely because we no longer find it unusual.
 

Whatever use we may make of the corporation in reducing costs or maximizing efficient production, its core coherence derives from its perceived integrity as a form distinct from its constituent elements.  To this end, corporate law encodes the dynamic of connection and constraint depicted in the metaphor of a koinonia politike—a “partnership of the city” or “social contract.”  On the one hand, it connects people through a common name, shared purpose and synchronized interaction; it even links people across time by enabling these elements to survive the loss of any one participant in the venture.  In additional, the law establishes the contours of an adaptive mechanism for collective decision-making; individuals may have their differences, but after exchanging information they make a choice directed toward re-synchronizing action.  

At the same time, corporate law also establishes a set of constraints that work together to resist reduction of the whole to select parts, particularly through opportunistic self-serving behavior managers and controlling shareholders.  The hallmark of the modern corporation—limited liability—is one such constraint; by creating a firewall between corporate obligations and directors’ assets, the law signals that the corporation is not equivalent to its managers.  Fiduciary duties perform a similar function.  The duty of care and the duty of loyalty each establish that a director must serve a higher interest than their own;  in a way contemporary corporate theory has yet to grasp, every corporation is to some degree a nonprofit corporation, inasmuch as even managers who are shareholders must rein in their private interests to benefit an entity that is greater than themselves.

Like social enterprise, corporate law functions as a generative algorithm that takes shape in a diverse array of forms.  It is at its most basic level the contemporary analogue of the classical notion of civil society—it serves as a means to leverage emergence as a tool, and this tool in turn reshapes how we think and act.  

The effects of this dynamic are evident in the course of corporate history itself.  Through the early nineteenth century, the corporation in law was a quasi-public entity; as Blackstone’s chapter illustrates, the term was synonymous with charities, churches and corporate ventures granted charters because they served the public good.  It is precisely this aspect of corporate form that contemporary advocates of civil society overlook when they mistakenly assume that Alexis de Tocqueville was referring only to nonprofits in his landmark description of American voluntarism.  In reality, de Tocqueville was describing an array of cooperative enterprises seen at the time as providing public benefit, many of which we would now categorize as for-profit business corporations.  

The emergence of differentiated categories within organizational law—business corporations, professional corporations, nonprofits and so forth—reflects the same sort of clustering that we saw in the emergence of distinct wells of attraction within social enterprise.  In certain key details they appear distinct, such as different rules for asset distribution or different default structures for governance.  Yet they are all self-similar, coded to generate a new discrete identity from constituent elements, albeit to varying degrees.   

At base, corporate form is not just a set of connections and default rules.  It is an organizational technology programmed to create a discrete new identity. Twenty-five hundred years ago this identity seemed unfathomable, even miraculous, something capable of being understood only if anchored to a deity, city or nation.  Over time the anchors became more variable—an identifiable monastic order, an academic universitas, a church—until eventually it became so familiar as to be credible where two or three people gathered together under a common name.    

Today the corporation is not the only organizational medium that expresses distinct identity.  We have grown so acclimated to organizational media that mimic emergent identity that the law treats even the commercial partnership as a discrete entity for certain purposes, while various contingent circumstances have sparked the creation of equally distinct corporate entities, such as the limited liability company.  The brand name itself is an extension of the corporate name as a mode of creating a novel identity; every time we encounter a logo we perceive a self-subsisting set of properties rooted in a model of emergence.

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