Show Me The Money! (Part 2)

(This post is part of a multi-post thread, and is in response to Part 1.)

Show Me The Money: Corporations

Nearly everyone on this great nation is employed by a corporation, in all its many glorious forms. But what is a corporation anyways? We can look at it in a multitude of ways, but we will only point out two. First, the law states that it is a separate and distinct entity unto itself. This enables it to sue and to be sued. This is how many of us view it, as a giant singular thing. Unfortunately, this point of view neglects the broader, more "nobler" definition: It is a vehicle which a group of people works together to obtain a collective goal. For our purposes, we will focus on this definition. Now, to explain this "group of people working together" we must focus on how a corporation is organized.

Corporations: Publicly Traded Organizational Model

Most corporations are set up in the following manner:

First, there are the owners. In publicly traded companies (on a stock exchange), an owner is anyone who owns a portion of the company (in the form of stocks or mutual funds). Many of you may be such an owner. Owners have the rights of voting on certain business decisions, as well as a proportionate share in the profits made by the company. The owners are the single most important group within the corporation.

Second, there are the board of directors. Board members are decided on by a vote by the owners of the company. The board’s role is to decide on the overall direction of the company, and to determine who the titled officers are. In essence, the shareholders have delegated to the board to watch over the company. The board reports directly to the shareholders.

Third, there are the titled officers (CEO, CFO, COO, President, etc.); we'll call them chief officers. The chief officers actually do the day-to-day running of the corporation. They are chosen by the board, as is their compensation. In essence, the board members have delegated to the chief officers to run the company. The chief-est of the chief officers is the CEO (Chief Executive Officer) who reports directly to the board. All other chief officers report to the CEO.

Fourth, there are the high-level and mid-level managers, as well as white-collar and blue-collar workers. For our purposes, we will simply refer to this group as employees. Power and responsibility trickle down to this group of workers. Employees report to their respective manager.

Corporations: Why They Exist

Despite popular opinion, a corporation is not there to make your life better or easier, if you work for a corporation it is not there to pay your paychecks, it is not there to help you pay for your house, it is not there to make you happy by making you food, or clothes, or computers. No, stop it, do not argue with me, it isn't there for any of those reasons. The sole purpose for the existence of a corporation, without exception, is to make money for the owners. Owners, after all, are investing their own money into this corporation - they expect to make a return on that money, just as you do when you invest in the stock market. All those other things are merely a by-product of making money. Now, to explain why these are just a by-product of making money we need to lay a bit of groundwork from your economics class…