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Death of the Company?

Tom Campbell argues that the digital economy requires a new type of organisation to replace the Limited Company.

The Death of the Company?

By Tom Campbell, June 2000

Despite two hundred years of brilliantly reasoned forecasts, capitalism is currently in rude health, but the days might well be numbered for that basic unit of the capitalist system, the company. This time, you don’t need any Marxist theory to work out what’s going on, it’s simply that, like the Church of England, Trade Guilds and the British Monarchy, the institution of the company no longer serves any useful purpose.

Already today, the concept of the Limited Company is starting to seem not just unfashionable, but old fashioned. This is partly because it is old fashioned, an institution invented in the mid-nineteenth century, when railways and mining were the driving forces for economic and social change, geographic and social mobility highly limited and the labour force largely uneducated, poorly skilled and cheap.

For all but the most recent of the last 150 years, this institution has been a highly successful piece of organisational technology. By creating an entity with proprietary rights and responsibilities over its human and intellectual capital, it ensured that entrepreneurs were granted legal and financial protection to innovate and take risks. Whatever might happen to the company, the company owners would never lose personal assets as a result of their greed and foolishness.

While there’s nothing wrong in a legal distinction between entrepreneurs and their enterprises, there are profound problems in the proprietorial, cultural and organisational constraints that companies impose on those that work for them. In an economy where physical assets are a negligible concern and capital readily available, the success of a business venture is critically dependent on the talent that it can attract. Increasingly aware of this, talented individuals are demanding what a company cannot provide: greater freedom in their choice of work, better rewards, a creative atmosphere and more control over their intellectual property.

Already, institutional constraints are restricting the creative potential, working effectiveness and personal development of professionals. The talented new media producer does not necessarily want to work on a certain website simply because her company has been commissioned to build it, she wants to work on whatever projects can sufficiently interest or compensate her. The brilliant programmer has little interest in creating clever software that enables her company to make millions, while she receives a steady salary. Or consider the ethically troubled copywriter, employed by an advertising agency, who spends half his time working on an account he loves, and the other half on a cigarette brand.

Ultimately these restrictions are not just detrimental for employers, but hinder the healthy development of the organisation itself, including its investors, directors, partners and clients. Throughout the digital economy, there are technologies, products, ideas and projects that have become unnecessarily and unprofitably incorporated when what they require is a radically different form of structure, culture and objective than that provided by the company.

In search of a new organisation model, perhaps we should discard the nineteenth century Limited Company, and actually go back further to the brothel, one of the oldest organisational structures of them all. In the brothel model, updated for the digital economy, talented individuals are loosely and temporarily assigned to ‘houses’ that provide them with the clients, team, creative environment, tools and the administrative framework they require to work. The house Madame owns the brand and takes a healthy share of the revenues, but the bulk of decisions, profits and intellectual property reside with the individuals working on each project. Wherever possible, and taking guidance from the Madame, it is the clients themselves who choose which of the house’s roster they wish to work with.

It is the brothel, rather than the company, that will give entrepreneurs a motivated and effective team, while clients will enjoy a new level of openness in their working relationship, as corporate obstacles disappear. For talented professionals, it means you will be at last getting the freedom and incentives you demand and deserve. So get out there and start prostituting yourselves.