24 Bus. Law. 149 (1968-1969)
Corporate Decision-Making and Social Control; Berle, Adolf A.

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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