Corporate Communications
3 Corporates – unique organisations
operate the business. A smaller, but increasing number (particularly medium-sized and larger businesses) are corporations or, as they are more commonly referred to, ‘corporates’
or ‘companies’. Corporates have a specific and unique form of organisation structure when it comes to structure and operations. Unlike other organisations, which may have significant overlap between ownership, management and operations, corporates are entities that (at least legally) separate ownership (represented by directors) from operations (represented by managers and conducted by operatives).
Balmer (2008) states that the juridical (legal) theory of the corporation is of importance in comprehending both the orthodox understanding of corporate identity and represents a key philosophical perspective apropos the nature of organisations. While the laws, regulations and rules for corporates vary from country to country, depending on the prevailing political, legal and economic conditions, in general, we can distinguish between:
Public Limited Companies (PLC’s): Companies which raise capital by offering shares on a public market, such as the stock exchange. Typically a PLC will have thousands of owners who will meet annually (at an AGM – Annual General Meeting) to elect a Board of Directors.
The Board will have oversight of and drive the strategy though the activities of the company.
The directors and will employ managers (who in turn will employee others) to operationalise the strategy. Historically such companies were set up to raise substantial amounts of capital to attract investment for costly infrastructure projects such as building canals, ports, railways and roads and often made a return for investors by successfully managing the related
operations (rail transport services). Over time, PLCs became involved in a much wider range of business-types, notably- in most countries the top 100 – 500 corporates will be PLCs.
Ownership of the company remains in the hands of shareholders, whose shares can be bought and sold on a public market.
The world’s largest plc
It will be unsurprising to find that most of the World’s largest companies – the so-called, Trillion-Dollar Club – is made up of publicly-traded companies. These have managed to achieve $1 trillion or more in market capitalization. According to Companies Market Cap (2021) – which tracks over 5,000 of the World’s largest publicly-traded stocks - only six businesses have achieved a 13-digit market capitalisation.
As of 2021 the six companies are Apple, Microsoft, Saudi Aramco (all with a $2T+ market capitalisation, followed by Alphabet (Google), Amazon and Tesla. Facebook had reached the $1T barrier but dipped below it again the final quarter of 2021. All of the companies are considered to be US head-quartered, with the exception of the World’s largest oil and gas giant - Saudi Aramco.
There are few plcs with a market capitalization above $500 billion who might join the club.
Among them are Facebook, Berkshire Hathaway, TSMC, Tencent and Visa.
Private Limited Companies: Companies which raise capital by offering shares to a private group of individuals, usually by invitation. In reality, these individuals often comprise family, close business associates, friends and others who are ‘known’ to the management team.
While the investors purchase shares, the buying of selling of those shares is much more tightly controlled by the Board of Directors.
The World’s largest private company
A company that some have probably never heard of – Cargill - is the most valuable private company in the world. Only a dozen or so plcs earn more revenue than Cargill which operates in 70 nations, employs 155,000 people, and imports almost one-quarter of all the beef that enters the United States. Its interests range from phosphate production to
energy trading, it totals over $113 billion in revenue, annually. The understandably secretive Cargill family owns 90% of the conglomerate (Investopedia, 2021).
In a private company there is, in many cases, overlap between owners/shareholders, the board of directors and the managers/employees of the firm, and the organisation is said to be ‘tightly controlled’. Similarly, the direction and strategy of the company and the operations of the organisation are closely integrated.
Two family companies
While Cargill is a family owned company it is an outlier. Most private companies are family owned and range in size from very large to small-medium in size. A good example is Schmitz Cargobull which was founded in 1892 and produces, markets and distributes vehicle trailers - from box body trucks for temperature-controlled transport to swap systems. The company has remained in the hands of the family throughout its 130 year history and continues to grow by providing innovative solutions that support daily transport operations. The company has annual revenue of circa $2.5 billion (Family Capital, 2021).
The two limited organisation types outlined can be differentiated from ‘unlimited’
organisations – sole-operations, partnerships or cooperatives to name the key types found.
Such businesses are typically less formally structured and do not have the same level of legal protection as limited companies. If a company (whether public or private) were to become insolvent, the shareholders’ liability to those to whom money is owed would be limited to the value of the shares; in an unlimited organisation those owed money could pursue the entire assets of the owners – including all their business and personal assets such as their home.
Sole-trader which became a partnership, then a private company, and a public company (P&G)
Procter & Gamble Company, headquartered in Cincinnati, Ohio, was formed from two sole-trader businesses when William Procter, a British candlemaker, and James Gamble, an Irish soap-maker, merged their businesses in Cincinnati (the two met when they became in-laws). They realised the main ingredient for both their business’ products was animal fat, which was readily available in the hog-butchering centre of Cincinnati, and their father-in-law persuaded them both to go into partnership in 1837. They later formed a company which went public in 1890.
Later, Balmer outline three other key considerations that should be taken into account in relation to stakeholder prioritisation in addition to legality (the organisation’s juridical identity such as the memorandum and articles of association):
• Efficacy, taking into account the needs, wants and desires of broader stakeholders such as politicians, customers, etc.
• Ethicality, the explicit ethical/corporate social responsibility (CSR) remit of the organisation.
• Temporality, consideration given to key stakeholders of the past (the founders who may have established and financed the entity, managers and employees who meaningfully contributed to its success, and prospective future stakeholders whose perspective may, for example, influence concepts of sustainability.
For a person who is appointed as a Communications Director or Manager it is vital that the understand for which type of entity they are working. The title of Communications Director can apply to someone who is on a board of directors, with all its related responsibilities, or to a senior management position separate to a role on the board. A Communications Manager, where they be a Chief Communications Officer or an Assistant Brand Manager will have less onerous responsibilities from a legal and other perspectives. The day -to-day activities in which their role dictates will also differ, and be aimed at slightly different audiences – the board director may focus on communications to shareholders, the manager may
communicate to a wider range of stakeholders. It is worthwhile noting that for many small businesses, the practice of corporate communication is largely unplanned. A study by Oliver and Reilly (1996) concluded that it is characterized by a lack of understanding both of what corporate communication is and how it can be of benefit to the small business. For most organisations, however, corporate communications is as planned and managed as directors and managers choose it to be.