Adolf A. Berle - Biography - Academic Career and The Modern Corporation and Private Property

Academic Career and The Modern Corporation and Private Property

Berle became a professor of corporate law at Columbia Law School in 1927 and remained on the faculty until retiring in 1964. He is best known among economists and corporate law specialists for his groundbreaking work in corporate governance. His book, The Modern Corporation and Private Property, which he co-authored with economist Gardiner Means, remains the most quoted text in corporate governance studies. Berle and Means showed that the means of production in the U.S. economy were highly concentrated in the hands of the largest 200 corporations, and that within the large corporations managers controlled firms despite shareholders' formal ownership.

Berle theorized that the facts of economic concentration meant that the effects of competitive-price theory were largely mythical. While some advocated trust busting, breaking up the concentrations of firms into smaller entities in order to restore competitive forces, Berle believed that that would be economically inefficient. Instead, he argued for government regulation and became identified with the school of business statesmanship, which advocated that corporate leadership accept (and theorized that they had to a great extent already accepted) that they must fulfill responsibilities toward society in addition to their traditional responsibilities toward shareholders. Corporate law should reflect this new reality, he wrote in The Modern Corporation: "The law of corporations, accordingly, might well be considered as a potential constitutional law for the new economic state, while business practice is increasingly assuming the aspect of economic statesmanship."