Berle and Means Reconsidered at the Century's Turn

I. INTRODUCTION Adolf Berle and Gardiner Means's The Modern Corporation and Private Property1 still speaks in an active voice. Since it first appeared in 1932, corporate law has been reckoning with its description of a problem of management responsibility stemming from a separation of ownership and control. This history has two phases. During the first phase, which lasted for fifty years, the book, and particularly its recommendation of stepped-up fiduciary constraints, became the basis of a paradigm that dominated the field. The second phase began in the early 1980s, when the book lost its paradigmatic position along with the general collapse of confidence in regulatory solutions to economic problems. A body of hostile criticism also had an effect.2 Some claimed that events had superseded the book's salience.3 Others asserted it to be wrong on the facts.4 Yet today, despite diminished status and generations of criticism, The Modern Corporation and Private Property has not gone away. At the end of the second phase's second decade, Berle and Means retain an enviable place at the forefront of policy discussion in a field where even a highly successful academic contribution rarely has a shelf life exceeding ten years. The database confirms their continued presence.5 Westlaw's "JLR" index shows citations of The Modern Corporation and Private Property in 677 articles as of March 2001. Fifty-one of those articles were published in 1999, the most recent year for which complete data are available.6 The 1999 figure compares instructively with those of the two leading corporate law volumes published in the 1990s, Frank Easterbrook and Daniel Fischel's The Economic Structure of Corporate Law7 and Mark Roe's Strong Managers, Weak Owners.8 Berle and Means firmly hold their ground against the newcomers: Easterbrook and Fischel's book was cited in eighty-one articles in 1999; Roe's in thirtyone. They do better still against their contemporaries. During the 1920s and 1930s, John Dewey and William O. Douglas also joined in reconstructing corporate legal theory. Dewey came first with an essay, The Historic Background of Corporate Legal Personality,9 offering a definitive critique of a set of inherited concepts about the firm. Douglas and Berle followed, taking similar paths. Douglas's academic work on bankruptcy at the Columbia and Yale Law Schools led to Washington appointments and the rare chance to turn an academic policy construct into real world law reform. The Modern Corporation and Private Property likewise influenced New Deal legislation.10 Berle, moreover, was a member of the "Brain Trust" that advised Roosevelt during the 1932 presidential campaign and an occasional advisor in Washington thereafter.11 But the two career paths diverged over time, with Douglas becoming a Supreme Court Justice and Berle remaining a professor. Yet, at least in the area of business law, Berle's voice remains stronger today. Douglas and Dewey tend to speak to us in the context of historical inquiry, whereas Berle and Means show up in discussions of present problems. The citation numbers again provide confirmation. Where The Modern Corporation and Private Property shows up in 677 articles, Dewey's essay has been cited in a much smaller (but respectable) total of 54 articles.12 Douglas runs a distant third. His collaboration with Jerome Frank on the absolute priority rule shows up in only six articles in the Westlaw database;13 his empirical work on small bankruptcies14 is mentioned in eleven. IS He is better remembered for making new bankruptcy law some years later as a Supreme Court Justice. His opinion for Case v. Los Angeles Lumber16 is cited in 349 articles I 7-foundational no doubt, but not as much as The Modern Corporation and Private Property, which of course never had the benefit of the status of positive law. The Modern Corporation and Private Property's endurance is a singular event in the last century of academic corporate law. …