It appears that the November presidential election is set: Mitt Romney vs. Barack Obama. The Republicans will try to make the election about the President's first term record. Did he deliver on what he promised when he ran successfully four years ago? The Dems will try to cast Romney as a super rich guy who is out of touch with mainstream America. So far the three sound bites which the Obama strategists like to play the most are (i) Romney proposing a wager of $10,000 to Governor Rick Perry during a Republican candidates' debate, (ii) Romney telling a Michigan audience that his wife, Ann, drives "a couple of Cadillacs," and (iii) Romney asserting to an Iowa State Fair crowd that "corporations are people." The first two of these are clearly gaffes, particularly the second blurb. (The first blurb was, I think, said in jest, so although it was an ill-advised bit it should not signal his political death knell.) He could not have picked a state worse than down-on-its-luck Michigan to utter the Cadillac factoid. But was he really so off-base with his "corporations are people" proclamation? I have a feeling that a good chunk of those pointing the finger at Romney on that one, especially Democratic National Committee Chairwoman Debbie Wasserman Schultz, know little about corporations. Schultz pounced on Romney as if he were a lunatic. His statement was a "shocking admission" of misplaced priorities, she said. Upon hearing Schultz' accusation, one would have thought he was guilty of unwittingly whispering a secret to the head of a communist nation over a live microphone! Her take on corporations, and the take of others who castigated Romney for his "people are corporations" statement, stops with the inalienable truth that corporations are, in fact, inanimate objects. True enough. But let's look a little closer.
Although the last couple of decades have introduced some hybrid forms of business formations, such as limited liability companies and limited liability partnerships, the three base types of business formations are sole proprietorship, partnership (aka general partnership) and corporation. In a nutshell, a sole proprietorship is owned by a single person (as the name implies), and a partnership is owned by two or more persons who are each almost always jointly and severally liable for each others' debts. A corporation, on the other hand, is owned by one or more persons, and the individual monetary
A person who invests in a corporation is called a shareholder, so named because a share of stock is what the corporation gives to that investor as proof of her ownership. So, a corporation is owned by shareholders, the overwhelming majority of whom are people, sometimes thousands of them. A corporation employs people, and with that comes not only a salary but also benefits such as health care, sick leave and retirement programs. A corporation produces goods or services which are used by people, sometimes out of necessity. Many corporations are what's commonly referred to as "good corporate citizens," because they sponsor the efforts of local non-profits, they donate money to non-profits, they organize and encourage their employees to participate in activities (e.g., paint-a-thons, Habitat For Humanity projects) which benefit their communities, they establish foundations (looked upon as a "charitable arm" of the company), they provide expertise among the civic leaders, and they often help establish the face of the city in which they're located. If a corporation does well, the shareholders are rewarded with an increase in the value of their shares, and maybe even dividends (a form of profit sharing).
Corporations are the lifeblood of the economy of their communities, and it's not only because they provide jobs and their employees spend their wages as buyers of goods and services. The corporations themselves are also buyers. A corporation which sells goods gets its raw materials or inventory from other businesses. In order to keep their own operations going, corporations are customers of public utilities, security personnel, insurance providers, food vendors, maintenance workers and other types of companies in the area. Also let's not forget that corporations pay taxes.
The word "corporation" carries with it an almost immediate negative connotation, kind of like the word "dentist." But could you really live your life without them? The food you eat, the clothes on your back, the car or bike you use for transportation, the television you watch, that i-phone which seems like an appendage on your ear, that beer you inhale. Almost all of those things are brought to you by corporations. Do you participate in a 401(k), 403(b) or pension program? If so, there is little doubt that through those programs you are invested in mutual funds which, in turn, invest in corporations.
Corporations are owned by people, led by people as officers and board members, operated by people as employees, and benefit people directly and indirectly. Romney was technically incorrect in saying that corporations are people, but think about it. Was he really out of touch on that one? I'll bet you ten thousand pennies he wasn't!
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