In Taming the Octopus, historian Kyle Edward Williams focuses on the evolution of the modern corporation from its birth in the early days of the twentieth century to the present. This work deftly synthesizes a vast array of historical and legal research with the author’s own archival research. The result is a fast-moving, comprehensive, and captivating story of the people and events that have shaped scholarly and political debate about, and understanding of, the corporation and its place in society as the United States gradually assumed its place as world hegemon. This is a book intended for the informed citizen but should be of special interest to teachers of Corporations and related subjects, for here the reader will encounter the giants who have affected what we think and believe about what the corporation is and how it should be governed, as well as the debates that have raged throughout the life of the modern corporation.
The book begins and ends with the imagery of the modern corporation as an imaginary sea creature, an octopus as terrifying and as untamable as the giant squid in Jules Verne’s Twenty Thousand Leagues Under the Sea. That imagery had been used in books and editorial cartoons in the first decade of the twentieth century to caricature the might of emerging business behemoths, including the Standard Oil Trust, whose tentacles reached into every aspect of American life and controlled the politicians who acted counter to the public interest as the mighty creature demanded. The public indignation and resolve to combat this evil creature is an underlying theme throughout the book, which Williams identifies with three continuing tensions in the political and cultural life of the modern corporation.
The first tension concerns efforts to tame the octopus via a corporatist partnership between the modern corporation and the federal government. As Williams details, this effort was spearheaded by Teddy Roosevelt, who, before his presidency, had signaled a commitment not to destroy the corporation but “to make them subserve the public good.” After the financial crisis of 1907, Roosevelt backed legislation that offered exemptions from antitrust laws to corporations that chose to voluntarily register with the federal agreement, thereby agreeing to full financial transparency and a regime of close consultation and cooperation with government officials. Corporations uniformly opposed this first foray into corporatism, and the bill died in committee.
Corporatism again entered the playing field during the Great Depression and the early days of the Roosevelt Administration. Now, it was business leaders like Gerald Swope and Owen Young, as well as Roosevelt brain-truster Adolf Berle, who sought a corporatist partnership rather than federal direction of the economy under some American version of the communist regime evolving in Russia. They achieved initial, but short-lived, success with the soon-to-be-held-unconstitutional National Recovery Act. Nonetheless, a corporatist partnership emerged as the Securities Act of 1933, and the Securities and Exchange Act of 1934 adopted a disclosure rather than substantive regulatory approach to perceived problems with the stock market component of the modern corporation.
As Williams cogently recounts, the corporatist partnership and accompanying heyday of the manager continued through the 1960s, only crumbling when America’s years of unprecedented prosperity encountered the strong headwinds of international competition, the Arab oil embargo, and the collapse of the gold standard as the 1970s began.
Williams concludes his account of America’s corporatist dance with a concluding chapter titled “Larry Fink, President of the World.” In reading that chapter we are forced to consider: is America now entering a new form of corporatist partnership where the key actors are the modern corporation and the handful of institutional investors, primarily Blackrock and Vanguard, who in twenty years likely will own half of the shares in American corporations?
The second tension Williams identifies concerns efforts to have the federal government adopt a regime of federal chartering, thereby preventing the so-called race to the bottom that reformers attribute to the regime of state chartering. The desire for federal chartering had strong support by some members of Roosevelt’s inner circle from the beginning of the New Deal to near the end of the 1930s, but legislative efforts faltered as more pragmatic members of the inner circle and Roosevelt-confidant Felix Frankfurter supported the corporatist compromises.
A serious interest in federal chartering emerged again with the Vietnam War, and the Civil Rights struggle of the 1960s, which combined with the collapse of post-World War II prosperity to change public perception of the corporation. For a brief period running from around 1965 to 1980, the modern corporation came under attack for its role in the Vietnam War, its failure to advance social goals, and its irresponsibility in making unsafe products. Responding to Ralph Nader and his youthful disciples, Congress entertained a renewed effort to adopt federal chartering. That effort died as the 1970s closed and the Reagan Revolution and the Law and Economics revolution took power in politics and academic theorizing about the corporation.
The final theme identified and described by Williams is the use of the annual shareholders meeting as a forum not only to discuss shareholder economic interests but as a political conversation about the role of the corporation as a national and international citizen. Williams begins his treatment of this theme with the story of James Peck’s and Bayard Rustin’s efforts to use federal proxy rules and physical attendance at annual meetings to force the Greyhound Bus Line to desegregate seating in buses traveling in southern states. Along the way, Williams introduces the reader to serious “gadflies” like Wilma Soss, who championed the role of women stockholders, and independently wealthy Lewis Gilbert, who attended and prepared a report on hundreds of corporate meetings and resolutions from 1939 to 1979.
As Williams recounts, the role of socially and economically motivated shareholders continues to evolve with the emerging role of the institutional investor. The push and pull of the resulting conversations between corporate managers, shareholders, and the larger society plays a central role in forming a more socially responsible corporation.
Taming the Octopus is not a dry recounting of these themes. Rather, it is illustrated by the stories of actors who dominated each episode. The book references not only the usual suspects but also brings to life persons who might otherwise fade from memory. My favorite example is Henry Manne.
By now, we all know the role of Lewis Powell, his memo, and his influence on the Supreme Court in changing the course of corporation law history. Likewise, we remember the Milton Friedman article in the New York Times trashing the notion of corporate social responsibility and the so-called Chicago School of Law and Economics that achieved intellectual dominance in legal scholarship in the 1980s. Moreover, the scholarly work of economists Alchian, Demsetz, Meckling, and Jensen is still strongly remembered for their role in deconstructing the corporation as an institution and the elevation of the nexus of contracts theory of the firms. Williams gives each of these actors proper attention.
Delightfully, however, Williams gives much more attention to Henry Manne, his career, and his impact—attention woefully missing in many accounts of recent history. Over twenty years Manne’s summer Law and Economics Institutions provided a free education in basic microeconomic theory to more than six hundred law professors, and more than half of the then members of the federal judiciary, including Ruth Bader Ginsberg and Clarence Thomas. These scholars and judges went back to their day jobs with a new understanding of the economic purpose of the common law and new tools for understanding legislation affecting the corporation. Thus, It was Manne who brought to life through his students the teachings of law and economics. In twenty years, there may no longer be any judge or academic alive who attended Manne’s summer institutes. Perhaps Williams’ thoughtful recounting of Manne and his role will keep alive Manne’s important, if controversial, contributions to the evolution of the modern corporation and our understanding of its shortcomings and strengths.
This book should be on the recommended reading list of students looking to better understand the history of the corporation. For teachers, it would serve as a syllabus framework for a course in corporate social responsibility. For corporation law scholars, generally, this is not a book with new ideas to cite–rather, it is an engaging and quick read that will stimulate new ways of synthesizing your own ideas and research. In that regard, it forms a bookend of sorts with Adam Winkler’s, We The Corporations: How American Businesses Won Their Civil Rights (2018), which I reviewed in a previous Jot.
