45 Harv. L. Rev. 1365 (1931-1932)
For Whom Corporate Managers are Trustees: A Note

handle is hein.journals/hlr45 and id is 1423 raw text is: FOR WHOM CORPORATE MANAGERS ARE TRUSTEES 1365

T-HE administration of corporations- peculiarly, a few hun-
dred large corporations - is now the crux of American
industrial life. Upon the securities of these corporations has
been erected the dominant part of the property system of the
industrial east. A major function of these securities is to provide
safety, security, or means of support for that part of the com-
munity which is unable to earn its living in the normal channels
of work or trade. Under cover of that system, certain individuals
may perhaps acquire a disproportionate share of wealth. But
this is an incident to the system and not its major premise;
statistically, it plays a relatively minor part. Historically, and
as a matter of law, corporate managements have been required
to run their affairs in the interests of their security holders.
From time to time other groups, notably labor, have asserted
their claims; and these claims are receiving steadily greater
recognition as a cost of industry. If these costs are not met,
security holders receive an illusory additional profit. But the
security holder's claim was the supposed main objective.
Professor Dodd has challenged the theory.' He has stated his
own thesis:
The present writer is thoroughly in sympathy with Mr. Berle's
efforts to establish a legal control which will more effectually prevent
corporate managers from diverting profit into their own pockets from
those of stockholders, and agrees with many of the specific rules which
the latter deduces from his trusteeship principle. He nevertheless be-
lieves that it is undesirable, even with the laudable purpose of giving
stockholders much-needed protection against self-seeking managers,
to give increased emphasis at the present time to the view that business
corporations exist for the sole purpose of making profits for their stock-
holders. He believes that public opinion, which ultimately makes
law, has made and is today making substantial strides in the direction
of a view of the business corporation as an economic institution which
1 For Whom are Corporate Managers Trustees? (1932) 45 HARv. L. REv. 1145.

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