One of the major organizational innovations in the history of business was the development of the corporation. Corporations are distinguished from single proprietorships and partnerships (the two traditional forms of business organization) by two features: the organizational separation of ownership and management, and the legal limitation of owners' liability to the amount of their investment. The separation of ownership and management has proven enormously beneficial to both owners and managers, since it brings together those who have capital but not necessarily the skills or time to run a business and those who have managerial skills but not necessarily the capital. Corporations' limited liability has also made available increasing amounts of capital: since thsoe who provide the capital are legally liable only for the actions of management and only to the extent of their investment, they are more likely to be willing to invest.
The success of the corporation has brought a flood of criticism; in fact, during the past century the bulk of criticism of business has focused on the corporate form of business. Robert Hessen's In Defense of the Corporation is an excellent study of the corporation's historical and moral roots, and contains clear and accurate responses to the major criticisms of corporations.
