The "Corporation" assumes a central position in modem economic life. This is due mainly to the fact that major portions of our economic activities are performed by corporations. Numerous authors have pondered the essence of the corporate phenomenon, proposing various theories for the uniqueness of the corporation as opposed to other possible structures for operating a business. The main line of analysis focuses on the central characteristic of the modem corporation: the separation of ownership and control. Managing a business through the means of a corporation allows one to exploit the advantages of specialization. On one hand, shareholders benefit from the services of professional managers who manage the business operations of the company. On the other hand, shareholders have the flexibility to spread their investments between various companies and, by doing so, decrease the risks involved in investing in business activities. In short, the managers specialize in management, while the shareholders specialize in assuming the risks of investment. This division of roles, made possible by the limited liability granted to shareholders, is meant to allow the corporation to operate efficiently while improving the shareholders' ability to invest in risky business activities.
Business Organizations Law | Law
Controlling Corporate Agency Costs: A United States-Israeli Comparative Law,
Cardozo J. Int'l & Comp. L.
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