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24 Bus. Law. 149 (1968-1969)
Corporate Decision-Making and Social Control

handle is hein.journals/busl24 and id is 183 raw text is: November 1968 CORPORATE DECISION-MAKING AND SOCIAL CONTROL By ADOLF A. BERLE* New York City As the position of corporations has changed in the past thirty years, so has the position of their legal counsel, and, specifically, of the lawyers in charge of their legal departments. In my youth, it was customary to look down on these men as tame lawyers. No longer. Like all lawyers, they still have the function of passing on specific legal problems as they arise and must give their legal conclusions on the basis of their professional judgment, irrespective of whether or not their professional conclusion is pleasing to their client- employers. In addition, sitting at the right hand of the policy-making officers, they have the opportunity, if not the duty, to advise upon the possible consequences, economic, legal and social, of corporate de- cision-making. For some years in our seminar at Columbia, we developed the theory that the law affecting corporations falls in two categories. The first is familiar to all of you-the explicit rules laid down by decision or statute and setting out the existing legal capacities and liabilities. The second, more important and more difficult category, we call inchoate law. This relates to the ddties of corporations, not set out either in decision or statute, but arising from the impact on social and economic situations foreseeably resulting from a corporate course of action. When the im- pact point is reached, it is predictable that a hitherto undetermined lia- bility or responsibility will suddenly emerge as explicit law. This result might come about through sudden demand for and passage of legisla- tion-or through decisions of administrative authorities breaking new ground-or through court-decision extending judicial action beyond previous limit. It is the business of the head of a corporate legal depart- ment to be aware of these fields of inchoate law, and to guide corporate policy so that the results will accord, rather than conflict, with these inchoate rules. In the truest sense, this is corporate statesmanship, and the duty comes to rest in the legal departments advising corporate man- agement far more than in their outside counsel. Transition of the large corporation from a private enterprise to a social institution has now been accomplished and is generally recog- nized. Their size, breadth of power and unlimited scope dominate the American economic scene. This is due primarily to two legal privileges granted corporations. Taken together, they proved to be the unintended * Professor Emeritus of Columbia Law School, Columbia University; member of the New York Bar. Adapted from an address before the Association of the Bar of the City of New York at its program on The Future Direction of the Modern Corporation on April 23, 1968.

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