Quasi Governments and Inchoate Law: Berle’s Vision of Limits on Corporate Power

Abstract

In honor of the Berle X Symposium, this essay gives prominence to key writings of the distinguished corporate law scholar Adolf A. Berle, Jr. from the 1950s and 60s. By the early 1950s, Berle had rejoined academic life after years in government service. When he returned to scholarly writing, Berle repeatedly highlighted the problem of economic power in corporations. He wrote about this as both an issue of “bigness” as an absolute matter and relative to particular industries in terms of concentration. He conceded that history had vindicated the late Professor E. Merrick Dodd’s view that directors of large corporations are stewards not only for shareholders, but also for employees, customers, suppliers, and other stakeholders.

At the forefront of Berle's later scholarship were two additional concepts describing mechanisms by which the law could control corporations and rein in their encroachments on individual liberty. The first was the notion of corporations as “quasi governments,” subject to the application of constitutional principles as state actors. The second was the idea of “inchoate law,” a term coined to describe how the community “moves into action, either through the courts or through the legislature, or through some other form of political intervention” when corporations do not fulfill their expected social roles. This essay excavates both concepts and connects them to twenty-first century debates, arguing that Berle’s concept of corporations as quasi governments provides a counterpoint to greater expansions of corporate rights and his writings on inchoate law offer a historical foundation for recent calls for corporations to embrace a more capacious view of their responsibilities.

Keywords: Berle, corporate rights, state actor, corporate power, quasi government, inchoate law, corporate social responsibility, CSR, publicness

JEL Classification: B2, K1, K2, K3, L21, L50