What Is Corporate Enterprise?

Second Quarter 2002

Second in a Series on Poverty, Wealth, and Globalization

by Bob Goudzwaard

Foreign investment and free trade do not by themselves create sustained economic development. Healthy enterprises need to be built in poorer countries as well as in richer countries. But what constitutes a healthy enterprise? The following edited excerpt is drawn from an essay first published in a 1975 book by Dr. Goudzwaard entitled Aid for the Overdeveloped West. Goudzwaard is professor emeritus at the Free University of Amsterdam and the 1999 Kuyper Lecturer for the Center for Public Justice.—Ed.

What can be said from a Christian point of view about the position of the business enterprise in contemporary society? Let us first ask the question, What is an enterprise? It is, in the first place, a relationship in which people live and work together. People engaged in economically qualified cooperation use means of production financed by providers of capital. In general, the Christian view of ownership of property does not admit the ownership of living people, for slavery denies the principle of equality of all people before God. This, of course, is true not only of individuals, but also of persons who constitute an organized relationship. Therefore, those who provide the money can never be the owners of the enterprise, which is a relationship of living people. Their ownership right is a limited one that can never apply to the entire enterprise and the activities of its members.

The stockholders should at most be recognized as the owners of the capital goods of the enterprise. Therefore the directors of the firm are accountable to the stockholders for the management of these capital goods—and only for that. The firm gives this accounting in its function as a legal entity, as a "corporation." Shareholders are not actually members of the business enterprise, they are only members of the corporation. Only the employer and the employees are real members of the enterprise in its day-to-day economic activities.

The direct consequence of this view, which limits the ownership right of the providers of capital, is that the enterprise now is entitled to have a development of its own. That is, the enterprise has a right which may be exercised against the providers of capital, if necessary. This right has its direct ground and support in the communal calling of employer and laborer in the enterprise. The interests of the enterprise, including those of the laborers who are part of it, may not become a mere extension of the interests of the providers of capital. Therefore, when the providers of capital have the right to call the corporation to account concerning what is being done with their capital input, the employees certainly have just as much right to call for an account of what is being done with their labor input.

In the nineteenth century the relationship between the enterprise and employees was not subjected to a structural criticism. In the fierce competition between firms, employees found their wages sharply reduced and their wives and children drafted into the production process. An employer who tried to pay his employees their just wage suffered such losses that he could not stay in business. Here clearly the societal structure itself gave rise to sin. The employer, as it were, was forced to deal unfairly with employees. This had to be changed.

Today we recognize to some extent that employees should have a voice in the enterprise. However, this should not be a voice for just any old opinion. It should be a voice that encourages both employer and employees, management and subordinates, to develop a normed work community, by which I mean an enterprise, under the direction of the employer, that aims for stewardly control of all scarce resources and is oriented to the fulfillment of real needs in society. A voice for employees does not deprive the employer of his or her authority; rather, it confirms it. For through the employees' voice the employer's authority may be better able to function according to the norms imposed on this authority by God.

There is a strong responsibility motif as well as a strong community motif in what I am saying here. By "community" in the enterprise I am suggesting much more than a vague feeling of solidarity. There is a radical difference. The humanistic idea of solidarity always tries to draw boundary lines between those for whom one should feel a sense of solidarity and those for whom one should not. The Christian idea of a normed work community, by contrast, cannot recognize such boundaries.

In raising the "responsibility" theme, I do not intend to suggest that a democratic structure answers all questions, as if democracy should be the norm for every social relationship. To the contrary, a democratic structure might become an instrument for wiping out important structural differences between different kinds of social relationships when it is conceived in artificial isolation. For example, the government's responsibility to parliament is not identical to the employer's responsibility to his employees, nor is it like the unique responsibility relationships in a family or a church. The norm of responsibility does not float somewhere above this earthly life, but time and again directs itself concretely to different kinds of societal relationships, including the enterprise of a work community.

Other articles in this series:
First: Law, Politics, and Corporate Enterprise (1st Q., 2002) 
Third: The New Institutional Economics (1st Q., 2003)
Fourth: Owning Capital or the Enterprise? (3rd Q., 2003)