The Magnificent Corporation

Houston skyline Wise words from Professor Bainbridge:

Legal education pervasively sends law students the message that corporate lawyering is a less moral and socially desirable career path than so-called “public interest” lawyering. The corporate world is viewed as essentially corrupting and alienating, while true self-actualization is possible only in a Legal Aid office.

Our students get these messages not only in law school, of course, but also in the media. Films like “A Civil Action” or “Erin Brockovich” illustrate the general ill repute in which corporations-and corporate lawyers-are held, at least here in Hollywood.

In my teaching, I have chosen to unabashedly embrace a competing view. I tell my students about Nicholas Murray Butler, president of Columbia University and winner of the Nobel Peace Prize, who wrote that: “The limited liability corporation is the greatest single discovery of modern times. Even steam and electricity are less important than the limited liability company.”

I tell them about journalists John Micklethwait and Adrian Wooldridge, whose magnificent history, The Company, contends that the corporation is “the basis of the prosperity of the West and the best hope for the future of the rest of the world.” [.  .  .]

The corporation also has proven to be a powerful engine for focusing the efforts of individuals to maintain economic liberty. Because tyranny is far more likely to come from the public sector than the private, those who for selfish reasons strive to maintain both a democratic capitalist society and, of particular relevance to the present argument, a substantial sphere of economic liberty therein serve the public interest. Put another way, private property and freedom of contract were “indispensable if private business corporations were to come into existence.” In turn, by providing centers of power separate from government, corporations give “liberty economic substance over and against the state.” [.  .  .]

And so I ask my students: What explains the relatively rapid development in the mid-19th century of a recognizably modern corporation and, in turn, that entity’s emergence as the dominant form of economic organization?

The answer has to do with new technologies – especially the railroad – requiring vast amounts of capital, the advantages such large firms derived from economies of scale, the emergence of limited liability that made it practicable to raise large sums from numerous passive investors, and the rise of professional management.

For the most part, these advantages remain true today. The corporation remains the engine of economic growth, both at the level of giants like Microsoft and garage-based start-ups.

The rise of the corporate form thus has “improved the living standards of millions of ordinary people, putting the luxuries of the rich within the reach of the man in the street.” The rising prosperity made possible by the tremendous new wealth created by industrial corporations was a major factor in destroying arbitrary class distinctions, enhancing personal and social mobility. Many of the wealthiest businessman of the latter half of the 19th Century and the 20th Century began their careers as laborers rather than as scions of coupon-clipping plutocrats.

And so I put it to my students this way: You want to help make society a better place? You want to eliminate poverty? Become a corporate lawyer. Help businesses grow, so that they can create jobs and provide goods and services that make people’s lives better.

So, why are we doing this to those who are attempting to facilitate the benefits of this marvelous creation?

3 thoughts on “The Magnificent Corporation

  1. legal education pervasively sends law students the message that “money talks and bullshit walks” . . . my BS meter is off the chart on this posting !!!!!!!!!!

  2. One of the great frustrations people have about corporate lawyers is that they often are enlisted to perpetuate unlawful activities of the corporation. Sadly, federal courts wink and nod at certain unlawful corporate activities an dthe people are left powerless to see that justice is done and laws are enforced against corporate interests (I have no first hand experience of such activities in state courts).
    If laws are enforced against the people but not against the corporate interests, it unquestionably generates hatred against corporations in general. The fact that laws are applied unfairly against a few corporate officers doesn’t bother me in the least. After all, corporate law isn’t about equity and justice, its just a big game and in most games, some calls go for you and some go against you.

  3. It’s horrific the misperception people have of corporate villainy. For every corporate predation there are 100,000s of welfare cheats, medicare scams, etc., not to mention the poor living ingratitude for the taxpayer’s generosity day after day. Wall Street is the epicenter of virtue on the earth today. The crime epicenter is 125th Street (and, of course, the hinterlands, too, where the meth-labs are brewing). Having worked there as a corporate lawyer I can tell you you will not meet a more dedicated and underappreciated labor force anywhere, most underpaid both before and after taxes and what can in the end be $15/hour (after taxes) even if the salary is $100,000+.
    But my main point is this; it’s those corporate lawyers who do make a lot who pay 70% in taxes even today when you include all taxes like sales, inheritance taxes, real estate taxes, etc. They pay for the social programs, i.e., the salaries of their most vicious slanderous critics.

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