332 Property Law

Doubtless reflecting anxiety about the economic insecurity that millions of Americans were then facing during the Great Depression, he wrote, ‘When [corporate property] and the income stream upon which [corporate stockholders] rely are irresponsibly dealt with, a large portion of the group merely devolves upon the community; and there is presented a staggering bill for relief, old age pensions, sickness-aid, and the like.’ Removing from shareholders their economic security so that corporate property could be used to serve the interests of other groups was simply robbing Peter to pay Paul unless the government simultaneously adopts ‘a system . . . by which responsibility for control of national wealth and income is so apportioned and enforced that the community as a whole, or at least the great bulk of it, is properly taken care of ’.

Berle presented his obligation-to-the-community theory as a third way, an alternative to the ‘managerial discretion’ theory and the ‘strict property rights of shareholders’ theory. He recognized that this theory had to be clearly developed, but he warned that ‘you cannot abandon emphasis on ‘‘the view that business corporations exist for the sole purpose of making profits for their stockholders’’ until such time as you are prepared to offer a clear and reasonably enforceable scheme of responsibilities to someone else’. Once the shareholders’ interests were adequately taken care of, though, the community had a legitimate claim to have other groups’ interests protected as well. These included ‘fair wages, security to employees, reasonable service to their public, and stabilization of business’. A program along those lines might well shift some corporate profits from shareholders to employees and other groups to whom corporations conventionally do not owe fiduciary duties, but so long as the shareholders’ basic welfare needs were served, they had no legitimate basis for demanding that their profits be maximized. The corporation was, after all, a quasi-public institution, and its legal obligations had to be defined consistently with its character.

Subsequent to writing The Modern Corporation and Private Property, Berle’s views became more obscure still. In 1954, he conceded that his dispute with Dodd ‘has been settled (at least for the time being)’ squarely in favor of Professor Dodd’s contention. He now considered corporate management to be free to practice social responsibility. Still later, however, he asserted that his concession was only that things had changed in fact, not that they had changed for the better. ‘Things being as they are’, he wrote, ‘I am unabashed in endeavoring to seek the best use of a social and legal situation whose existence can neither be denied nor changed.’

Berle never got around to describing an alternative ‘scheme of responsibilities’ for corporations. Oddly enough, he did not support proposals to reconstitute boards of directors to include representatives of employees or consumers or calls formally to redefine the goals of management.

8.4.2. Managerial property holding

There are a number of other property holding mechanisms which involve the separation of title and benefit, in the sense that the property holder is not only precluded from taking a personal benefit from the property but is also put under positive duties to administer it for the benefit of others. The most well known of these mechanisms is the trust, evolved by equity precisely for this purpose, but