An Overview of Corporations

An Overview of Corporations
Is it time to rethink public corporations? (MPR Nov. 14, 2012)
MinnEcon Category Archive: Minnnesota Fortune 500 companies
The cozy deals between medical companies and doctors explored (MPR Dec 27 2011)
Fortune 500 (CNNMoney)
The Place of Corporations in Public Policy
Lobbying
Lobbying
A Paradigm for Landscape
Legislation
Regulation
Judicial Opinions
Activities
Goods
Services
Structures
Organization of Space
Landscape
Law
Public Policy
Organization of Behavior
Government
Role
Evaluation
Indices
Evaluation
Transportation – automobile, railroad, airline, and shipping companies
Raw material production – mining,
Manufacturing/Wholesale/Retail – food, clothes, consumer goods,
Services – banking, insurance,
Production Spectrum
& corporations
Information –statistics, public records
Risk assumption
Deconstruct public policy into statutory, administrative, and case law
Lobbying
Congress
Legislative Mandate
Agency
Legislation
Lobbying
Regulation
Courts
LAW – PUBLIC POLICY
Study: A small dose of chocolate could cut heart attack or stroke risk by almost 40
percent (The Gaea Times, March 30, 2010)
Bitter claim: Price of your chocolate fix is fixed (Star Tribune, March 31, 2010)
• Eden Prairie-based Supervalu Inc. filed suit Monday in a Pennsylvania federal
court, claiming that the Hershey Co., Mars Inc., Nestle USA and Cadbury PLC fixed
prices on chocolate candy from 2002 through at least 2008
• Supervalu's suit echoes legal claims made in recent years against chocolate candy
makers by some of the nation's largest grocery and snacks retailers -- Kroger,
Safeway, Walgreens, and CVS Pharmacy
• Supervalu in its suit claims the four defendants control 76 percent of the U.S.
chocolate candy market, with Hershey leading the pack with a 43 percent share
and Mars second with 24 percent
• Instant Appeal Certified in Chocolate Price-Fixing Case (Law.com)
• 87 consolidated antitrust suits
• Update (Kotchen & Low October 9, 2011)
Justices to consider Wal-Mart suit on female workers (Washington Post, March 28,
2011)
Justices question whether women suing the retailer have made a compelling case that
a jury should hear the issue (Washington Post, March 29, 2011)
Wal-Mart Stores, Inc, v Dukes et al 564 U.S. ____ (2011)
Book. Civil Action (1996)
Film. Civil Action (1998)
• Anne Anderson, et al., v. Cryovac, Inc., et al. (Wikipedia)
Film. Erin Brockovich (2000)
Pacific Gas and Electric Company
Film. North Country (2005)
• Jensen v Eveleth Taconite Company (Wikipedia)
• Jensen v Eveleth Taconite Company 130 F.3d 1287
Project 4
Find a U.S. public corporation involved in some way with your topic
A. Describe its current operation
• Pay attention to the location of its various parts and its product line
• Pay attention, also, to the political and legal environment in which it carries out its
business
B. Describe the corporation's history for the past half century, especially changes in the
location of its plants, its product line, and its operational environment
Commercial Law (Wikipedia)
Learn about Business Law & Regulations (Small Business Administration)
Corporations: An Overview (Legal Information Institute)
“The law treats a corporation as a legal "person" that has standing to sue and be sued, distinct
from its stockholders. The legal independence of a corporation prevents shareholders from
being personally liable for corporate debts. It also allows stockholders to sue the corporation
through a derivative suit and makes ownership in the company (shares) easily transferable.
The legal "person" status of corporations gives the business perpetual life; deaths of officials
or stockholders do not alter the corporation's structure.”
Corporate Law Center (Fordham University)
Corporate Law (HG.org)
Importance of Corporations (ActionPA.org)
CorpWatch.org
Corporations (Anup Shar)
Classification of Corporations
 Public corporations – owned by the public – offering bonds and shares
• For profit
• Non profit – organized under U.S. Internal Revenue Code Section 501(c)
• Standard Industrial Classification
 Private corporations – owned by individuals, often family, America’s Largest,
private equity firms (Bain Capital)
• includes Government-sponsored enterprises – Fannie Mae, Freddie Mac
 Government chartered and owned corporations – FDIC, Ginnae Mae, National
Railroad Passenger Corporation, Pension Benefit Guaranty Corporation, St
Lawrence Seaway Development Corporation, Tennessee Valley Authority
 Municipal corporations
Public Companies (Wikipedia)
Public corporations – raises money from the public – you and I
 owned by the public, who purchase stock in the company
• traded on the Stock Exchange value of which rises and falls
• stock market
 borrows money from the public by issuing bonds
• to be paid back at a certain rate of interest over a certain period of time
• bond market
Must file forms and reports with the Securities and Exchange Commission (SEC)
May incorporate in any state
Bonds and stocks are both securities
Public Corporations
Joint stock company – a business in which capital is collected from the individual
contributions of shareholders, each of which is given certificates of ownership
(stocks) in return
The shareholders are free to transfer their ownership interest at any time by selling
their stockholding to others
The company is managed on behalf of the shareholders by an elected Board of
Directors – unusual for shareholder to be on board
Hold annual general meeting, produce an annual report, are audited yearly
Stock/Shareholders have a number of privileges
• share in the company's net profit – also called a dividend
• liable for company debts that exceed the company's ability to pay but usually
limited to the face value of their shareholding
Holding company
A company that owns part, all, or a majority of other companies' outstanding stock
Usually refers to a company which does not produce goods or services itself, rather its
sole purpose is owning shares of other companies
Holding companies reduces the risk for the owners and allow owners of the stock to
control a number of different companies
Stock and bonds of public holding companies can be owned by individuals
In the United States, Berkshire Hathaway is one of the largest publicly traded holding
companies, owns insurance companies, manufacturing businesses, retailers, and
other companies
Bank holding companies
United Continental Holdings Inc. and AMR Corporation publicly traded holding
companies whose primary purposes are to wholly own United and Continental
Airlines and American Airlines
Agri-business Companies
Archer Daniels Midland
Nash Finch
Land O'Lakes
CHS
General Mills - Pillsbury
Safeway
Hormel Foods
Securities & Exchange Commission
The mission of the U.S. Securities and Exchange Commission is to protect investors,
maintain fair, orderly, and efficient markets, and facilitate capital formation
Statutes and rules that govern the securities industry in the United States derive from a
simple and straightforward concept
All investors, whether large institutions or private individuals, should have access to
certain basic facts about an investment prior to buying it, and so long as they hold it
Statutes that govern the securities industry (SEC)
17 CFR Securities and Exchange Commission
Securities Law, Rules, Regulation, & Information (SECLaw.com)
U.S. Code (Legal Information Institute)
•
•
•
15 USC Commerce & Trade
12 USC Banks & Banking
29 USC Internal Revenue Code
CFR (Legal Information Institute)
•
•
•
•
12 CFR Banks & Banking
13 CFR Business Credit & Assistance
16 CFR Commercial Practices
17 CFR Commodities & Security Exchange
Pensions (Wikipedia)
Governed primarily by federal statutory law – the Employee Retirement Income
Security Act (1974)
Defined benefit plan the benefit that an employee receives is normally based on the
length of a workers employment and the wages that were received
• Each employee does not have a separate account in these programs, as the
money to support the pensions is generally administered through a trust
established by the employer
• No recourse for individuals with defined benefit plan when their employers go out of
business <1974 - Act passed in response to the mismanagement of funds in direct
benefit plans
• All employers who engage in interstate commerce and provide defined benefit
plans to their employees must abide by ERISA guidelines
Defined contribution plan the employer makes regular deposits into an account
established for each employee
• The employee receives the amount in the account at retirement
Pensions
Department of Labor responsible for the
operation of the pension plans
Internal Revenue Service responsible for funding
the plans
Pension Benefit Guaranty Corporation
established to insure the pensions
Federal corporation created by the Employee
Retirement Income Security Act of 1974
It currently protects (insures) the pensions of
more than 44 million American workers and
retirees in more than 29,000 private singleemployer and multiemployer defined benefit
pension plans
Operations are financed by insurance premiums
set by Congress and paid by sponsors of defined
benefit plans, investment income, assets from
pension plans trusteed by PBGC, and recoveries
from the companies formerly responsible for the
plans
Companies insured by PBGC
A Predictable Secure Pension for Life
Labor Unions
Objectives and activities but often include
•
•
•
•
Provide benefits to members - professional training and legal advice and
representation
Collective bargaining – negotiate with employers over wages and working
conditions.
Industrial action – organize strikes or resistance to lockouts
Political activity – promote legislation favorable to the interests of their members or
workers as a whole; pursue campaigns, undertake lobbying, or financially support
individual candidates or parties
US Labor Law
Executive Agencies
US Department of Labor – working conditions
US Department of Commerce – economic growth and jobs
Federal Reserve Board – flow and value of money
Federal Trade Commission – the nation's consumer protection agency
Small Business Administration – provides support to small businesses and smallbusiness owners
Consumer Products Safety Commission – product safety!
Food and Drug Administration – food and drug safety
Private Corporations
Companies which are privately owned
Capital raised via private funds
Does not need to meet the Securities and Exchange Commission filing requirements of
public companies
US largest private companies (Forbes.com)
Finding out about private companies (Chris Roush, UNC)
Private Equity (Wikipedia) Lists
Venture capital an investment to create a new company, or expand a smaller
company that has undeveloped or developing revenues
Buy-out acquisition of a significant portion or a majority control in a more mature
company. The acquisition normally entails a change of ownership
Special situation investments in a distressed company, or a company where value
can be unlocked as a result of a one-time opportunity (Changing industry trends,
government regulations etc.)
The Carlyle Group
The Blackstone Group (Wikipedia)
Avista Capital Partners – Star Tribune – Bankruptcy
Private equity, private lives (CNNMoney.com)
Private equity’s impact limited (TwinCities.com)
Corporate Tax Classification
For profit business (Internal Revenue Service)
• Corporations
• International Businesses
• Partnerships
• Small Business and Self-employed
Not for profit, charities – non-profit (Internal Revenue Service)
• Tax Information for Charitable Organizations
• Churches and Religious Organizations
• Political organizations – see also Federal Election Commission
• Private Foundations
• Contributors to Non-profits
Nonprofit Organizations
Nonprofits:USA.gov
The National Council of Nonprofits
A guide to environmental nonprofits (MotherJones)
Environmental Law Institute
Environmental Defense Fund
Natural Resources Defense Council
Nature Conservancy
List of nonprofits
Cooperatives
A legal entity owned and democratically controlled by its members, with no passive
shareholder
It combines the characteristic of many partnerships with the legality conferred on
corporations
Most cooperatives are organized as limited liability companies but other legal entities
may also be used
May or may not pay dividends to members by way of a rebate or bonus on their activity
with the cooperative, or a dividend on their shareholding in the cooperative
Electric Cooperatives (Wikipedia)
Dairy Cooperatives (USDA)
Land O’Lakes
Government Corporations (GAO)
A corporate entity established by Congress in which the government holds all equity
Most listed in the Government Corporation Control Act (1945)
The Act does not serve as a general incorporation law; each of these corporations have
their own enabling legislation that stipulates its powers
• Commodity Credit Corporation
• Federal Deposit Insurance Corporation (FDIC)
• Pension Benefit Guarantee Corporation
• Tennessee Valley Authority (TVA)
• The Saint Lawrence Seaway Development Corporation
• US Postal Service
• Federal Home Loan Mortgage Corporation (Freddie Mac)
• Federal National Mortgage Association (Fannie Mae)
Municipal corporation (Wikipedia)
Minnesota Statutes
Minneapolis
Real Estate Investment Trusts (REIT)
All about REITs
Created by Congress in 1960 to give anyone and everyone the opportunity to invest in
large-scale commercial properties
A tax designation for a corporation investing in real estate – reduces or eliminates
corporate income taxes – REITs are required to distribute 90% of their income,
which may be taxable, to the investors who will be taxed
REITs can be classified as equity, mortgage, or hybrid
It may focus on a particular type of property, for example offices, apartments, shopping
malls, strip centers or industrial properties
Its revenue is the total rent coming in from the tenants
Its profit is what remains after the property managers, janitors, lighting companies,
mortgage companies, and local units of government have been paid
Real Estate Investment Trust
Like other corporations REITs can be publicly or privately held
Public REITs may be listed on public stock exchanges like shares of common stock in
other firms
Public REITs in United States (Wikipedia)
General Growth Properties – REIT - nation's second-largest
shopping mall owner
Established by brothers, Martin and Matthew Bucksbaum, in 1954 as General
Management – opened first shopping center in Cedar Rapids, Iowa In 1960
1970 became General Growth Properties
1972 became a publicly traded company on the New York Stock Exchange.
1984 became a private company - sold 19 malls to Equitable Real Estate for $800
million but continued to manage them
1993 became public and in 1995 moved headquarters from Des Moines, Iowa to
Chicago - subsequently expanding its portfolio by acquiring existing properties and
constructing new malls
On November 12, 2004, acquired The Rouse Company in the largest retail real estate
merger in American history
April 16, 2009, company, owning 158 properties, second-largest mall operator at the
time filed for the largest real estate bankruptcy in US history
Macy's has 106 of its 840 stores in General Growth's malls
Bankruptcy
The collapse of General Growth Properties, which operates more than 200 properties,
is being called by analysts the largest ever failing by a mall operator
The company currently has $27.3 billion in debt versus $29.6 billion in assets
It has obtained $375 million in debtor-in-possession financing
• Ridgedale Center in Minnetonka
• Eden Prairie Center in Eden Prairie
• Knollwood Mall in St. Louis Park
• Apache Mall in Rochester
• Crossroads Center in St. Cloud
• River Hills Mall in Mankato
Timber Investment Companies –Timber Investment Management
Organizations
An Introduction to Timberland Investing
(Lyme Timber Co)
A Survey of TIMOs (Forest Service)
Institutional Timberland Investment (Yale
University)
Hancock Timber Resources Group
RMK Timberland Group
Timberland Investment Resources
(private)
The Lyme Timber Company (private)
TIMOs and REITs (.docstoc)
Timber (SmartMoney 2001)
REITs Spread to Timber Industry (Wall
Street Journal Nov 2005)
Wells Timberland REIT
Plum Creek
Potlatch
Pact Will Form First Publicly Traded
Timberland REIT (Memphis Business
Journal)
Timberland: Wealth Emerges From the
Forest (Wealth Management Exchange,
May 2008)
RMK and Nature Conservancy in the
Adirondacks (Timberland Blog)