The concept of owners and creditors is difficult to

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The concept of owners and creditors is difficult to understand. Here are two groups who lay claim to the same assets ofthe corporate enterprise.51 The difficulty seems to ease slightly when the rights of the two groups are con­ sidered separately. The creditors have prior claim to the assets of the corporate enterprise and the owners have a residual interest in the assets. There has been much development along the lines of creditor stock ownership. By having the creditors of a corporate enterprise invest in the corporation, there is usually less tendency to force payment of bills when a little extra time is needed. Such a condition can help a corporate enterprise over a poor period and hence, in the long run, make for greater returns to the owners of the corporation. Joseph A.'Schumpeter, Business Cycles (New York: McGraw-Hill Book Company, Inc., 1939), I, P» 104* 51 Bowman and Bach, op. cit.. p. 74•
131 The position of the creditors in a corporate enter­ prise is strong because they are protected by the law. When­ ever a corporate enterprise is in danger and cannot meet its obligations, " . . . the law frequently provides for the trans­ fer of control of the assets and sometimes the assets them­ selves to a receiver chosen by law or to the creditors.52 In mutual insurance companies, the stockholders are also the creditors. The owners assume all the risk of the company and divide the profits. There are usually • • almost no outside creditors.”53 Management. The entrepreneur of old was the operator and the owner of the corporate enterprise.54 However, the idea of the entrepreneur (an entity approach) has taken on new light and M. . . the entrepreneur may, but need not, be the person who furnishes the capital. . . . It is leader­ ship rather than ownership that matters.”^ The corporate enterprise is a collection of many units, ??. . . land, building, plant and equipment, workers, 52 Robinson, Adams, and Dillin, op. cit..pp. 13^-139* 53 Fisher, op. cit. f p. 85* 54 Marshall, Readings in Industrial Society, p. 714* 55 Schumpeter, op. cit., p. 103»
132 materials, and so on— controlled by an entrepreneur.rr56 It is the duty of the entrepreneur to set all of the units in motion so that a smooth organization exists in order to make a profit. The business unit or corporate enterprise is the important factor and regardless of who makes the decision, it is the corporation which gains or looses .57 The reason­ ing is in line with the entity theory because it places the entity as such above all others. Although the stockholder undertakes the greatest risk in the corporate enterprise, it is the management group which chiefly controls the organization. This manage­ ment group or controlling group usually owns only a small number of the total shares of capital stock outstanding of the corporate enterprise.^ Boulding brings out the idea that the corporation is not only a legal entity but psychic as well in the eyes of management. Management tries to enlarge the corporate enterprise for the sake of the corporation itself and hence, 56 Frederic Benham and Friedrich A. Lutz. Economics

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