The Asking Price of Incorporation: State Leverage and the Evolution of Corporate Purpose

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Abstract:

This article advances a new perspective on corporate purpose, grounded in the institutional conditions under which corporate privileges are granted. Using a novel dataset of historical UK royal charters and a mixed-methods empirical strategy, the study shows that early corporations articulated specific, enforceable, and public facing purpose clauses because incorporation was a scarce privilege that allowed the Crown to impose obligations as a “asking price” for the benefits of the corporate form. Machine-learning evidence demonstrates that clauses reflecting Crown leverage cluster systematically and decline over time as incorporation becomes more accessible. The findings reframe corporate purpose not merely as a normative contest among stakeholders but as the product of institutional bargaining at the point of corporate formation, offering a historical lens for contemporary purpose debates.

Link to paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6580099