History of Corporate Stocks in the Financial Industry
Corporate stocks allow investors to obtain equity in companies. The history of corporate stocks involves a long process of evolution in the United States and England. Corporate stocks for public companies are traded on stock exchanges. The largest and best known stock exchange is the New York Stock Exchange, which started under a buttonwood tree on Wall Street in 1792.
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History of the Corporate Form
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Originally a corporate charter was written such that a corporation would fulfill a public purpose. For example, one might obtain a corporate charter to build a public bridge. Over time, the corporations shifted to general purpose charters and focused only on making money.
Limited Liability
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One of the features of corporations is limited liability, which means that shareholders are not personally liable for the debts and torts of corporations. This means that if you buy one share of General Motors for $20 today, you won't be sued if General Motors releases a faulty car and gets hit with a class-action lawsuit. The most an investor stands to lose is his $20 investment and this makes investors more comfortable. Limited liability began with a court decision in England in 1855.
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Natural Corporations as Natural Persons
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Corporations became "natural persons" in the United States in an 1886 court decision. This is important, and controversial, because it gives them constitutional protections. It means they are protected by the 14th amendment, which was originally designed to protect freed slaves but in fact applies to all persons. Corporate personhood was also used to protect corporations' right to free speech under the First Amendment in the case of Citizens United vs. Federal Election Commission.
The London Stock Exchange
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Formed in 1698 the London Stock Exchange is said to be the oldest in the world. It was formed by John Castaing and it lists companies from 84 countries.
History of Wall Street
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The New York Stock Exchange on Wall Street is the largest stock exchange, listing companies with a combined worth of $15 trillion. When the exchange began, it was called the New York Stock and Exchange Board and it listed five companies. In 2010, it listed about 2,800 companies. The exchange is an iconic part of U.S. history and its closure on Sept. 11, 2001, and during the stock market crash of 1929 are poignant and important historical events.
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References
- Photo Credit stock exchange image by Christopher Walker from Fotolia.com
