What Does “Corporate” Actually Mean?
- November 21st, 2019 07:00 am
A corporation is a company that is a legal entity in the eyes of the state, and is owned by shareholders who each own a percentage of the company. When used in everyday conversation, however, the words “corporate” and “corporation” often come with negative associations of stuffy business rooms and huge, uncaring business operations.
The way people use the terms “corporate” and “corporation” colloquially doesn’t reflect their true meaning. In reality, these words refer to a variety of different business types, and only indicate that a business is legally structured in a particular way.
“Corporate” is defined as, “Formed into an association and endowed by law with the rights and liabilities of an individual.” “Corporation” is defined as, “A body formed and authorized by law to act as a single person although constituted by one or more persons and legally endowed with various rights and duties including the capacity of succession.” These literal definitions have a much more neutral connotation than the colloquial usage of these words.
What do people really mean when they talk about “corporate” as a feature of people, organizations, or culture? In this article, we’ll explore the varied connotations and nuances surrounding the term, and investigate what they actually mean in the modern business world.
The Colloquial Meaning of “Corporate”
When people refer to something as “corporate,” they’re generally referring to large businesses and organizations. In this context, “corporate” can be used to criticize bureaucracy, formality, and lack of originality. People sometimes use the phrase “corporate America” to refer to big businesses in the United States in a derogatory way.
This use of “corporate” reflects the experiences of many ordinary Americans with large corporations. Many people view these organizations as being uncaring, impersonal, and sometimes even actively harmful or corrupt. When used in this manner, “corporations” can especially refer to big, soulless brands that may have had a negative impact on the environment, the economy, or other areas of life.
“Corporate” may also be used to describe a stiff and uninspired work environment. In “corporate America” originality is frowned upon, and the status quo is revered. For many employees, this “corporate culture” can be unwelcoming and can stifle new ideas and growth. “Corporate” is often used in a negative way to describe the bureaucracy and hierarchy that can calcify around large, established businesses.
The Reputation of Corporate America
Corporations have played an important but controversial role in the American economy. Historically, the success of corporations has occurred in tandem with America’s increased power on the world stage. These businesses have allowed America to exercise economic and political power over the rest of the world. In addition, some argue that economic prosperity has improved the quality of life in America and around the world.
Despite this, however, many Americans remain critical of large corporations and the way they operate in the world today. In particular, 65% of Americans have a negative view of excessive top executive pay. Only 35% think corporations pay employees enough. Some Americans also have a negative view of corporate job creation, environmental protection, and support for local communities.
Issues with pay rates and corporate social responsibility have likely contributed to the negative associations surrounding the words “corporate” and “corporation.” People may associate corporations with harmful processes like financial deregulation, environmental pollution, and income inequality, among others.
While some corporations have definitely participated in some harmful practices, just because a business is defined as a “corporation” doesn’t mean they do harm by default. Corporations come in all shapes and sizes, and the process of becoming a corporation doesn’t have any impact on the ethical behavior of a particular company. Both ethical and unethical businesses can have corporate status.
The Reality of Corporations in America
Despite the negative connotations of these popular terms, in reality, corporations aren’t inherently good or bad. Incorporating is one of many ways you can structure a business. Organizations of all sizes, all over the world, are referred to and classified as corporations. In many states, a single person can even form a corporation, and many small businesses are also classified as corporations. For some entrepreneurs, forming a legal corporation is a major benchmark, a sign that dreams of small business ownership are coming true.
Why do people form corporations? The main reason is to protect against financial liability and to allow businesses to have greater freedom and flexibility. The “legal personhood” that a corporate entity possesses allows them to engage in activities like taking out loans, entering into contracts, hiring employees, and paying taxes.
In general, favorability ratings are much higher for specific corporations than for “corporations” as a whole, with 75% of people trusting their own employer to act ethically and do the right thing. While corporations may get a bad rap, the reality is that this term is often misapplied and misunderstood.
Why This Terminology Matters
“Corporation” is a broad term that refers to a wide variety of organizations, not just large businesses in America. Similarly, “corporate” can technically refer to any business that is structured in this way. Not all corporations are engaged in harmful or unethical practices, and plenty of innovators and entrepreneurs may choose to incorporate their business.
While “corporate” and “corporation” may be used colloquially to refer to the worst excesses of capitalism, their literal definition has a much more neutral valence, and can be used to describe many different kinds of companies.