English law recognised long ago that a corporation would have
separate legal personality, also known as
corporate personality or
juridical personhood. In 1612,
Sir Edward Coke remarked in the ''
Case of Sutton's Hospital,the Corporation itself is onely in abstracto
, and resteth onely in intendment and consideration of the Law; for a Corporation aggregate of many is invisible, immortal, & resteth only in intendment and consideration of the Law; and therefore it cannot have predecessor nor successor. They may not commit treason, nor be outlawed, nor excommunicate, for they have no souls, neither can they appear in person, but by Attorney. A Corporation aggregate of many cannot do fealty, for an invisible body cannot be in person, nor can swear, it is not subject to imbecilities, or death of the natural, body, and divers other cases.In 1776, Adam Smith wrote in the Wealth of Nations'' that mass corporate activity could not match private entrepreneurship, because people in charge of "other people's money" would not exercise as much care as they would with their own. In 1843,
William Gladstone took chairmanship of a Parliamentary Committee on Joint Stock Companies, which led to the
Joint Stock Companies Act 1844.
United States At the end of the 19th century in the United States, the law allowed for the concentration of wealth and power in the hands of a few people, or a single person. In response, the
Sherman Antitrust Act of 1890 was created to break up big business conglomerates, and the
Clayton Act of 1914 gave the government power to halt
mergers and acquisitions that could damage the public interest. By the end of the
First World War, it was increasingly perceived that ordinary people had little voice compared to the "financial oligarchy" of bankers and industrial magnates. In particular, employees lacked voice compared to shareholders, but plans for a post-war "
industrial democracy" (giving employees votes for investing their labor) did not become widespread. The
Wall Street crash of 1929 saw the total collapse of stock market values, as shareholders realized that corporations had become overpriced. They sold shares
en masse, meaning many companies found it hard to get finance. The result was that thousands of businesses were forced to close, and they laid off workers. Because workers had less money to spend, businesses received less income, leading to more closures and lay-offs. This downward spiral began the
Great Depression. This led directly to the
New Deal reforms of the
Securities Act of 1933 and
Securities and Exchange Act of 1934. A new
Securities and Exchange Commission was empowered to require corporations disclose all material information about their business to the investing public. After
World War II, a general consensus emerged that directors were not bound purely to pursue "
shareholder value" but could exercise their discretion for the good of all stakeholders, for instance by increasing wages instead of dividends, or providing services for the good of the community instead of only pursuing profits, if it was in the interests of the enterprise as a whole. However, different states had different corporate laws. To increase revenue from
corporate tax, individual states had an incentive to lower their standards in a "
race to the bottom" to attract corporations to set up their headquarters in the state, particularly where directors controlled the decision to incorporate. "
Charter competition", by the 1960s, had led Delaware to become home to the majority of the largest US corporations. This meant that the case law of the
Delaware Chancery and
Supreme Court became increasingly influential. During the 1980s, a huge takeover and merger boom decreased directors' accountability. To fend off a takeover, courts allowed boards to institute "poison pills" or "
shareholder rights plans", which allowed directors to veto any bid – and probably get a payout for letting a takeover happen. More and more people's retirement savings were being invested into the stock market, through
pension funds,
life insurance and
mutual funds. This resulted in a vast growth in the
asset management industry, which tended to take control of voting rights. Both the financial sector's share of income, and executive pay for chief executive officers began to rise far beyond real wages for the rest of the workforce. The
Enron scandal of 2001 led to some reforms in the
Sarbanes-Oxley Act (on separating auditors from consultancy work). The
2008 financial crisis led to minor changes in the
Dodd-Frank Act (on soft regulation of pay, alongside
derivative markets). However, the basic shape of corporate law in the United States has remained the same since the 1980s. ==Terminology and definition==