Text 4 Organization of the Corporation

Directors and Management. In a partnership, any individual partner can transact business for the firm. In small corporations the major shareholders often manage the business but in large corporations with thousands of shareholders such an arrangement would lead to immediate chaos and a breakdown of operations. Instead, control of the corporation is centralized in a board of directors elected at the annual stockholders' meeting, each share of stock having one vote. The board elects its own officers which include a chairperson, vice-chairperson, and a secretary. The board holds periodic meetings, typically once a month. The board of directors acts on behalf of the stockholders to set corporate policy, to make major decisions, and to hire management to carry on the day-to-day operations of the firm.

Profits and dividends. The profits from the operation of the firm accrue to the equity of the stockholders, and are distributed by the board of directors. The board decides how much of the profit is to be paid out to shareholders as dividends. The remainder of the profits constitutes retained earnings and is reinvested in the firm, thereby increasing the stockholders' equity.

Limited liability of stockholders. In a partnership, all agreements entered into or debts contracted by the firm are personally binding on all the partners. Since the shareholder has given up all immediate control over the corporation, he must be protected in some degree from liability for its actions. This is done by defining a limit to the liability of the individual stockholder.

Agreements and debts contracted by the directors and management are binding on the corporation, but not on the shareholders personally. If the corporation cannot fulfil its contracts or pay its debts, it can be sued like a person and like a person its property can be taken in payment. The stockholder can lose all he has invested in the company, but he has no personal liability beyond this. As an individual, he is in no way responsible for the debts of the company. This aspect of corporate organisation is called limited liability.

Discussion

These are some useful word-combinations in addition to the glossary that you will translate, memorize and use while discussing the problems:

To take advantage of (smth.), to maintain control, to develop mass-production technology, to issue corporate charter, to make contracts in one's name, to give up control, to fulfil contracts, to pay debts, to take in payments, to pool wealth (capital), to establish a corporation, to have an independent legal personality, to sue, to finance activities, to obtain an overdraft, to borrow money, to issue bonds/shares, to invite tenders, to confer voting rights, to give preference, to subscribe to the memorandum, to receive certificates of stock, to accumulate capital, to transact business, to act on behalf of (smb.), separate and legal entity, legal person, initial finance.

1. Discuss the main differences between corporations and small businesses. Use the table provided.

2. Is being a director the same as being an entrepreneur?

3. What types of securities have you learnt from this unit? Explain the difference between them.

4. What benefits can you expect being a shareholder?

5. What is a corporation? How does a corporation finance its activities?

For your notes:

Дата добавления: 2015-11-16