Philadelphia Reflections

The musings of a physician who has served the community for over six decades

Related Topics

Philadelphia Politics
Originally, politics had to do with the Proprietors, then the immigrants, then the King of England, then the establishment of the nation. Philadelphia first perfected the big-city political machine, which centers on bulk payments from utilities to the boss politician rather than small graft payments to individual office holders. More efficient that way.

Quakers: William Penn
Although Ben Franklin gets more ink lately, William Penn deserves at least equal rank among the most remarkable men who ever lived.

Government Organization
Government Organization

Quaker Business
New topic 2016-12-04 04:11:17 description

William Penn and the Corporate Model

{Privateers}
William Penn

The Proprietorship of West Jersey is pretty much unchallenged as the oldest surviving stockholder corporation in America. A number of points could be made about this creation, but an essential one is that Penn had very few existing models to work from. Nowadays, there are thousands of corporations in existence all over the world, many of them started by men of very little education or notable intelligence. Now that the subject has been mentioned, I can confess that I started three of them, myself. As I recall, it required only an hour's visit to a lawyer's office, for an agreed fee of $500 for each one of them, and after a two-week delay, I was said to be in business.

By contrast, consider Penn's problem. He had to conceive of the idea, and decide to go forward with it in spite of probably having almost no association with any other corporation, and probably without any assistance from any lawyer who had useful experience. While it is unlikely that he designed the modern corporation, or even contributed many useful design ideas, it is also likely he was so unaware of the known features of corporate design that he was nearly in the position of re-inventing this wheel if he expected it to succeed.

{Samuel Johnson}
Samuel Johnson

Nowadays, a lot of entrepreneurs are in a similar state of innocence about corporate structure, but the models exist and the rules have been made and tested. An hour's conference with an accountant and a lawyer is all that is needed to avoid a million pitfalls, simply setting out on a well-trodden path. A modern businessman may go to business school and emerge with the complaint that he was not taught anything very useful, but that is far from the case. An entrepreneur doesn't need to know much about accounting, or corporate law, or tax law, or personnel management. But he does need to know that he needs the services of an accountant, a lawyer, a tax expert, and an office manager. These experts exist and provide their services as a reliable package. Back in the Seventeenth century, those professions didn't exist, and it was scarcely common knowledge that the corporation couldn't function without a number of working parts. The skill of supervision, some concept of how to find and manage capable subordinate leaders, how much to pay them, all fell to the pioneer to discover. In Penn's case, he had to have a reliable organization in order to manage, even to police, the day-to-day complexities of a staff of people going about their duties, while he went about his own. His personal chores included making personal arrangements with the King of England to acquire what has become three states: New Jersey, Pennsylvania, and Delaware; it required negotiations with the Indians, and with New York, Maryland and Virginia about their disputes with him. He had to organize the Assembly, deal with the major stockholders, and worry about wars and uprisings three thousand miles away.

As Samuel Johnson observed about a dog walking on two hind legs, the remarkable thing was not that he did it well, but that he did it at all.

Originally published: Friday, January 15, 2010; most-recently modified: Wednesday, June 05, 2019