Corporations: Form and Origin•Modern corporations have two historical bases•Incorporated partnerships– Directors run the business and are significant shareholders, often the only shareholders•Public corporations based on trust relationship– Directors run the business for passive shareholders in a fiduciary capacity
Corporations: Public Corporations•Directors are trustees of the invested funds•May or may not be significant investors themselves•Run the business for shareholders•Also see to the affairs of the corporation
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Corporations: The Modern Form•In a modern corporation, these responsibilities are more distributed•Directors continue to be directly responsible for the affairs of the corporation, and its relationship with shareholders•Professional managers (executives) are retained and become primarily responsible for the day-to-day business of the corporation– Directors do not (and cannot) entirely escape responsibility for management, however, and at the highest level executives will still report to directors