18 Nov 2002  Research & Ideas

Where Morals and Profits Meet:
The Corporate Value Shift

Although recent headlines focus on business boondoggles, HBS professor Lynn S. Paine's research shows a rising standard of corporate performance that includes moral and financial dimensions. In an interview, she details this trend and her new book, Value Shift.


Editor's Note— Harvard Business School professor Lynn S. Paine's new book, Value Shift, argues that companies can't consider themselves amoral or apart from society anymore—that the relationship between companies and society at large necessitates bringing a moral dimension to decision making. In this interview with HBS Working Knowledge's Carla Tishler, Paine explains why this shift has occurred, and why now.

Tishler: Your research on corporate values and ethics dates back to the 1980s, including much work done for Harvard Business School cases. Clearly, business ethics issues have been around a long time. Do you see a marked difference in the types and degrees of ethical breaches occurring in the past, compared to more recently?

Paine: Business ethics, of course, is as old as business itself, but formal academic study of the subject is, as your question suggests, comparatively new. When I began working in this area, the field was just beginning to emerge. At the time, corporations were being taken to task for a host of moral failings—neglecting consumer and employee safety, ignoring civil rights, polluting the environment, violating election laws, misleading investors.

The 1970s, much like the period we are in today, had witnessed a dramatic loss of confidence in business and American institutions more generally. In 1968, 70 percent of the public thought business tried to strike a fair balance between profits and the public interest. By 1977, the proportion was something like 15 percent. The overseas payments scandal was another contributor to the malaise. More than 400 major U.S. companies had admitted to making illegal campaign contributions and bribing public officials to win business overseas.

Given the field's origins in these events, people sometimes forget that business ethics at its core is about excellence and high attainment rather than misdeeds and malfeasance. But we do pay attention to misconduct, and I have seen many types over the years—from the garden-variety deceptions and betrayals that sap morale and waste human energy to the serious forms of wrongdoing that destroy health, wealth, and life itself.

The issues span the ethical spectrum: falsified books and records, misleading communications, defective and dangerous products shipped without warnings or information, abusive behavior and unsafe conditions in the workplace, unwarranted favoritism and conflicts of interest, myriad examples of bribery and extortion, unfair and predatory competition, theft and misappropriation of information, civic and environmental irresponsibility.

Unfortunately, we have no reliable gauge of how the levels and types of misconduct have changed over time. One reason for this, as I note in the book, is that expectations for corporate behavior are constantly evolving. Conduct that would have been ethically acceptable in one era becomes unacceptable as expectations rise.

People sometimes forget that business ethics at its core is about excellence and high attainment rather than misdeeds and malfeasance.
— Lynn S. Paine

Moreover, new issues are constantly coming to the fore as a result of changes in technology, society, and politics. For instance, data privacy was not a major issue until the late 1980s and 1990s when companies began to exploit newly available information technologies. Recent advances in biotechnology have raised ethical issues that have never before presented themselves. And globalization has given rise to cross-cultural dilemmas that just weren't a major part of the scene in the 1970s.

Q: You note in your book that many companies are making a "turn to values,"—focusing on ethics, values, and examining company culture—but for varied reasons including risk management, organizational functioning, market positioning, and civic positioning. In your view, do you expect to see more companies follow one of these four routes more than the others? Does there always have to be a corporate justification? Will we see any trends?

A: As I describe in the book, the paths to values are many and varied. Some managers arrive by way of a crisis or scandal, and others by way of personal conviction or a logical process of reasoning and analysis. And a few are motivated simply by the vision of a better and more humane way of conducting business.

Overall, though, my experience has been that probably half, and maybe even two-thirds, categorize ethics mainly as a risk management issue. These managers tend to see corporate values as a tool for preventing misconduct with its incident legal, financial, and reputational risks. Ethics gets their attention because they want to avoid the high-profile missteps and billion-dollar losses experienced by a Salomon Brothers, Bridgestone/Firestone, or Enron.

In the future, I think more managers will recognize that risk management is only part of the story and that the benefits of positive values go well beyond problem avoidance.
— Lynn S. Paine

In recent years, however, I have seen more attention being paid to the positive side of ethics. More managers are waking up to the ways in which positive values contribute to a company's effective day-to-day functioning, as well as its reputation and long-term sustainability. In the book, I trace these connections in some detail and show how they play out in practice—sometimes in surprising ways.

In the future, I think more managers will recognize that risk management is only part of the story and that the benefits of positive values go well beyond problem avoidance. I have seen this progression in some companies that initially turn to values as a damage control measure when confronted with a scandal in their organization or industry. Then, over time, they come to take a broader view as they see the positive effects on work life, product quality, relationships with their constituencies, or their standing in the community.

Q: Having a positive value system in place can help contain costs by heading off trouble. But can improved values also add to the bottom line?

A: I've alluded to some of the ways positive values can add to the bottom line. And research points to others that I discuss in the book—better access to talent, enhanced employee commitment, better information sharing, greater creativity, enhanced reputation, and so on.

But I caution managers against focusing only on the financial case for values. No matter how much evidence we amass for this case, the fact remains that moral indifference and even blatantly unethical behavior can also be financially rewarding in many circumstances. We should not forget that slavery had its financial benefits for slave owners. And, in virtually every case of misconduct that I've studied, the perpetrators justified their actions by reference to the anticipated financial gains.

What's important to recognize, as I argue in the book, is that today's companies are being held to a higher standard. Financial results are a must, but in addition, leading companies are expected to achieve those results by acting in an ethically acceptable manner. This represents a dramatic departure from centuries of tradition holding that corporations are by nature amoral and thus incapable of assuming responsibility, adhering to ethical standards, or exercising moral judgment. But abundant evidence shows that companies today are expected to do all these things.

In every region I've studied, I've found business leaders who are trying to develop companies that meld high ethical standards with outstanding financial results.
— Lynn S. Paine

This shift in our understanding of the corporate personality has profound implications for management. Among other things, it means that managers must develop more robust ethical reasoning skills and increasingly subject their decisions to ethical as well as financial analysis. In a world in which companies are expected to behave as moral actors that conform their activities to certain ethical requirements, financial tests of acceptability alone are insufficient.

In the book, I spell out the implications of this shift in some detail and show how companies can become what I term "center-driven"—oriented toward strategies that make both ethical and financial sense. In the schema I lay out, companies can choose to be "dues payers" that practice an ethic of compliance, "sustaining members" that practice an ethic of mutuality, or "sponsoring members" that practice an ethic of contribution. But, as a practical matter, they can no longer choose ethical indifference as orthodox corporate theory has long maintained.

Q: What about the global picture? Are there other countries setting good examples for American firms to follow? Are there some places where the turn to values will be particularly difficult?

A: One of the most rewarding aspects of my research in recent years has been learning about well-regarded companies in all parts of the world. In every region I've studied, I've found business leaders who are trying to develop companies that meld high ethical standards with outstanding financial results. Generally, these are companies that seek to do an excellent job serving their core constituencies, including investors, customers, employees, and the public.

This is an inherently challenging task in any country, but it is more difficult in some environments than others, particularly those plagued by high levels of corruption. The effects of corruption are insidious and they go well beyond requests for bribes and favors. Obviously, the economic implications can be significant when your competitors can get away with paying off officials—either public or corporate—to win major contracts or secure exemptions from health, safety, or other requirements.

On the other hand, a background of corruption can sometimes make it easier for a good company to stand out. The story of Nigeria's Guaranty Trust Bank, which I recount in the book, provides a nice example. Given that studies have consistently found Nigeria to be among the world's most corrupt countries, it would not appear, at least initially, to be a very promising venue for a values-based company. But, for this very reason, GTB's founders felt it was imperative to try. They set out to build a bank that would be known for its workplace innovations, outstanding customer service, superior financial results, and exemplary corporate citizenship.

In general, though, it is easier to meld ethical commitment and economic success in environments where information is free-flowing and people have real choices about where to work, invest, and consume. Of course, people can only make sound choices if they are educated and have ongoing access to relevant information. So an educated populace and a free press are also important. In addition, a well-understood ethical framework and an effective legal system are crucial. In other words, it is very hard to talk about corporate ethics without paying attention to the broader social and institutional context in which a company is operating.

Q: What other projects are you working on?

A: As I note in the preface, Value Shift raises many more questions than it answers. So there are several directions I am considering for my next project. But, for now, the general idea is to go more deeply into the cross-cultural issues you just asked about.

For the past few years I have been developing a course on cross-cultural management for the second-year MBA program. While this project has persuaded me that leading companies around the world are gravitating toward a set of what might be termed "generally accepted ethical principles," it has also persuaded me that cultural differences present some formidable challenges for companies and their managers.

In my next project, I hope to shed some light on this murky area and also to help fill a gap in our curriculum. Historically, cultural issues have not had a central place in management education, but given the world today—and the role of business in it—familiarity with these issues has become essential preparation for business leadership.

The Corporation's Evolving Personality

by Lynn S. Paine

If the value shift we see in many companies around the world cannot be wholly explained in purely financial terms, can a better explanation be provided? A more satisfactory account begins with an appreciation for a subtle but striking development in what has sometimes been called the "personality" of the corporation—the pattern of attributes thought to define its essential nature. This change in the character of the corporation has affected how companies are thought about, what's expected of them, and how they are evaluated. Seen in broad historical context, this development is nothing short of revolutionary, though its gradual nature, unfolding across the last century, has somewhat obscured its significance.

book cover: Value Shift

This development, which has picked up momentum in recent decades, explains why the notion that ethics pays has gained plausibility in recent years—and also why this maxim is nonetheless an inadequate guide for companies that aspire to positions of leadership in today's world. Let me introduce this development with a brief anecdote.

In the mid-1990s, I traveled to Argentina on a research and speaking trip. As it happened, my visit occurred not long after IBM Argentina had been accused of paying off the directors of Argentina's state-owned Banco Nacion to win a $250 million contract to supply the bank's information systems. The bribes, which were allegedly offered to the directors and others through a shell company whose only apparent purpose was to channel payments, were at the time said to be some $37 million, or 15 percent of the contract's value. As I spoke with Argentine executives and business students I discovered that many of them wanted to talk about the problem of corruption. Perhaps I should have expected as much, given the findings of public opinion polls at the time. Gallup polls showed that Argentina's citizens consistently ranked corruption, along with unemployment and education, as the country's top three problems.

Whenever I asked about corporate values, the talk would eventually turn to the pervasiveness of corruption and the difficulty of avoiding it when doing business in Argentina. I was told that in many sectors bribery, kickbacks, and payoffs had come to be accepted as normal—simply the way things were done. The IBM example was naturally cited as a case in point. However, it was usually mentioned in a tone of surprise laced with a hint of disapproval that IBM would do such a thing! When I asked why they were surprised that IBM would do what they had just told me was commonplace, they would reply with a look of puzzlement. "Well, we expect more of a world-class company like IBM."

To anyone steeped in traditional thinking about the nature of the corporation, this response is quite remarkable. Within this tradition, it has long been an article of faith that companies are nothing more than convenient instruments for carrying out business activities—that they are entirely amoral and thus lacking any capacity for ethical self-discipline or moral judgment. In this view, whether they are described as instruments of production or instruments of wealth creation makes little difference. From this traditional perspective, expecting a company to conform its activities to a set of ethical standards—let alone take the lead in addressing a societal, problem like corruption—is entirely inappropriate. It would be like expecting an automobile, a mechanical device devoid of consciousness and incapable of moral judgment, to obey the rules of the road or to swerve to avoid a child who runs into the street.

Yet these Argentine executives and business students expected IBM to obey the law and to figure out how to go about its business without running afoul of ethical standards against payoffs. What's more, they expected IBM, as a global and presumably world-class company, to behave better than prevailing norms dictated and in this way contribute to solving one of the country's most pressing problems.

The people I spoke with in Argentina are not alone. According to the Millennium Poll on Corporate Social Responsibility, a 1999 survey of more than 25,000 individuals across twenty-three countries on six continents, two in three people say that companies should go beyond their traditional functions of making a profit, paying taxes, creating jobs, and obeying the law. In addition, respondents said, companies should also try to set a higher ethical standard and contribute to broader societal goals. In other words, companies should achieve profitability in ways that help build a better society. In all but three of the countries surveyed, 50 percent or more of those surveyed took this position. Among those who expressed this view, about half defined the corporation's role as "exceeding all laws, setting a higher ethical standard, and helping build a better society for all." The remainder of this subset said companies should operate "somewhere between" the traditional definition of the corporation's role and this more demanding one. 1

Parallel but even more striking results emerged from an August 2000 survey in the United States. 2 Some 95 percent of these respondents said that companies should sometimes forgo some profit for the sake of making things better for their workers and communities. Although, as with almost any survey research, we could quibble about methodologies, response bias, and other issues, it is noteworthy that both groups of respondents evidently expect companies to exercise moral judgment in carrying out their activities.

A glance at history

In attributing a capacity for moral judgment to the corporations, these respondents go against an orthodoxy whose lineage is both long and venerable. The doctrine of corporate amorality has ancient roots in corporate law, and it has played a central role in the thinking of many economists and management theorists up to this day. This doctrine found perhaps its most colorful expression in the comment of an eighteenth-century English jurist who railed at the corporation for lacking either "pants to kick" or "a soul to damn." 3

Though forcefully put, the thought itself was not original. In a seminal legal case decided early in the preceding century, another eminent English jurist, Sir Edward Coke, had declared that corporations, because they had no souls, could neither commit treason nor be outlawed or excommunicated. 4 Coke was writing about a hospital, a charitable corporation, in an era when most business corporations, apart from trade guilds, were bodies set up under royal charters to develop foreign trade and colonies. 5 In fact, the corporate form came to be used extensively for business in England only in the latter part of the nineteenth century.

To Coke, and to many who came before him, it made no sense to attribute moral responsibility to a corporation. How could such a manifestly "artificial" and "intangible" entity be a moral agent? That it could not seemed self-evident. The logic had been spelled out almost four centuries earlier by Pope Innocent IV, to whom the "fiction theory" of the corporation is sometimes attributed. 6 After wrestling with the problem of punishment for ecclesiastical corporations, the Pope concluded that the exercise was more or less futile. Unlike a real person, he reasoned, a corporation has neither a body nor a soul to experience the pain of punishment. And therefore, as merely a "fictional person," a corporation was by its very nature an unsuitable subject for punishment or excommunication. 7

The fiction theory, shorn of its overt religious origins, was carried forward and reaffirmed in 1819 by the U.S. Supreme Court in the well-known case of Dartmouth College v. Woodward. 8 Although this case concerned a charitable corporation, business corporations were by this time gaining popularity in the United States, where some 350 were established between 1783 and 1801. 9 Even so, the business corporation was thought of mainly as an agency of government chartered to build bridges, turnpikes, canals, and the like. In exchange for meeting such public needs, it was granted certain special privileges and immunities, the specific nature of which would change and evolve over time.

In Dartmouth College, Chief Justice John Marshall described the corporation as "an artificial being, invisible, intangible, and existing only in contemplation of law." 10 As such, he wrote, a corporation could possess only those properties conferred by its charter of creation. Among these were "immortality" and "individuality," as well as others necessary to carry out the purpose for which it was created. Needless to say, moral personality was not included—nor could it have been, given the "artificial" or "fictional" status ascribed to the corporation. By their very nature, fictional entities lack the attributes necessary for moral standing, or so it was reasoned. Indeed, Marshall declared in another case that, as an "invisible, intangible, and artificial being," a corporation, was "certainly not a citizen" under the Constitution. 11

In the late nineteenth century, the fiction theory underwent a makeover reflecting the changing times. With the proliferation of "general incorporation statutes," beginning around midcentury, the government's role in forming corporations receded into the background. Under these statutes, corporations could be formed without a special charter from a state legislature. 12 By 1875, special charters had become largely a thing of the past, and virtually anyone could form a corporation simply by filing the appropriate forms and paying the required fee. 13 Many did so: The latter half of the century saw a phenomenal increase in the number of incorporations across the United States. A similar expansion occurred in England as freedom of incorporation took hold and the joint stock company, with the advantage of limited liability, became a form available as of common right. 14 These open policies on corporate formation lent credence to the new idea that the corporation was not, as Marshall had declared, a creature of the state with only those powers conferred by its charter, but a creature of private agreement. 15

The new conception of the corporation as a fictional umbrella for a private association of shareholders strengthened the argument against government control over corporations and enlarged their sphere of authority. Nevertheless, the corporation's moral status, or lack thereof, remained unchanged. By reaffirming the corporation's fictional nature, the new approach negated the possibility that the corporation could have an identity separate from the identities of the individual shareholders comprising it. Nor could the corporation have either a moral personality or any responsibilities beyond those of its shareholders viewed as individuals. Besides, as a mere instrument, a corporation could hardly be evaluated in moral terms.

Of course, not everyone bought into the idea of the corporation as a fiction. By the dawn of the twentieth century, with the spectacular growth of corporations in the United States and Europe, academics on both sides of the Atlantic had begun to challenge this characterization. They insisted that the corporation was a "natural" or "real" entity, thereby drawing attention to the sociological fact of growing corporate power and influence as in the great railroad and manufacturing corporations as well as the immensely powerful oil trusts of the time.

The "natural entity" theory found an audience among both critics and supporters of the corporation's growing influence. Critics saw it as justifying their concerns about increasingly large concentrations of capital and its impact on community life. Supporters, on the other hand, saw it as legitimating new rights for corporations and enhancing the authority of officers and directors in relation to shareholders.

The theory squared neatly with a variety of legal doctrines being applied to corporations by the end of the nineteenth century. By that time, the corporation's capacity to sue and be sued, its freedom of contract, and its right to certain constitutional protections were well established in the United States. For legal purposes, the corporation had been declared a citizen, contrary to Justice Marshall's earlier insistence that this was not the case. Moreover, U.S. law had unequivocally embraced the doctrine of limited shareholder liability. Shareholders were now safely shielded from personal accountability for the corporation's debts and other liabilities incurred by corporations in carrying out their activities. At the same time, the law prohibited shareholders from managing the corporation's day-to-day affairs and precluded them from challenging the board of directors' business decisions except in cases involving willful misconduct. 16

These developments, which strengthened the corporation's legal personality and diminished the role of shareholders, made it increasingly awkward to describe the corporation as a fiction or to think of it as a purely private contractual arrangement among a group of investors. Indeed, the very term "corporation" took on two usages, sometimes referring collectively to the body of shareholders and at other times referring to those with authority to act on the corporation's behalf.

Although the natural entity theory might have provided a platform for a distinctive idea of corporate, as opposed to individual, morality, it did not develop in that direction. 17 Instead, discussions of the corporation's personality trailed off into a morass of confusion over such abstruse matters as whether the corporate "person" was really a "person." 18 By the 1930s, legal academics had largely abandoned this line of thinking, and talk of the corporation's personality faded. However, the natural entity theory had by then done its practical work of legitimating large-scale enterprise in the eyes of the law. 19 The corporation had attained sufficient stature to be counted among the ranks of society's essential institutions. According to one leading authority on corporations writing at the time, "It was apparent to any thoughtful observer that the American corporation had ceased to be a private business device and had become an institution." 20

The "institutional" view of the corporation thus moved into the mainstream and became the dominant framework for legal thinking. With this move came suggestions that the corporation, as such, had responsibility, not just to stockholders but to other parties as well—a position that would seem to imply a moral personality for the corporation. Noting a seeming shift in public opinion, a leading U.S. legal theorist speculated in 1932, "...a sense of social responsibility toward employees, consumers, and the general public [might someday] come to be regarded as the appropriate attitude to be adopted by those who are engaged in business." 21 However, it would take several more decades for this sense to become widespread. Even in 1958, an opponent of the social responsibility movement called it "young and rather unassuming" but dangerous enough to portend trouble should it gain momentum. 22

Meanwhile, the fiction theory of the corporation had not entirely died off. In certain economic circles, this old bottle was being filled with new wine. Rejecting ideas of corporate entities and seemingly oblivious to the legal developments noted earlier, these thinkers offered up a new blend of private contracts as the essence of the corporation. According to the model that eventually emerged, the corporation was not merely a private agreement among investors but a series of private agreements among providers of production inputs. 23 Injected with new vitality, the fiction theory was propelled into prominence again in the 1960s and 1970s.

Unlike the English jurist who had seen in the corporation's fictional nature a cause for frustration, the theory's new proponents viewed it as a shield against the period's increasingly strident calls for corporate responsibility. 24 "Only people can have responsibilities," wrote a leading economist in 1971, in a coolly reasoned argument against corporate social responsibility. 25 Because corporations are only "artificial persons," he postulated, they "can have only "artificial responsibilities." According to this line of reasoning, advocates of corporate social responsibility are guilty of a grave mistake of metaphysics. By virtue of companies' very nature as legal fictions, they cannot have responsibilities to their employees, customers, or the communities in which they operate—or so the argument ran.

This argument, with its eerie echoes of Sir Edward Coke and even Pope Innocent IV, can only ring hollow to the contemporary ear. The size and influence of today's corporations far exceed anything even remotely imaginable to the authors and early proponents of the corporate fiction doctrine. Yet even today, some lawyers and economists insist that the corporation is merely a "legal fiction," implying that it is not a proper subject of moral assessment. They argue that companies are only amoral instruments of commerce, extensions of their shareholders' property rights. Echoing the centuries-old view, they argue that moral responsibilities can attach only to individual human beings and that it therefore makes no sense to speak of such things in relation to corporations.

Of course, such metaphysical niceties did not stop my Argentine interviewees from making moral judgments about IBM's behavior or prevent the survey respondents mentioned earlier from calling on companies to a set higher ethical standard. Nor have they stopped millions of employees, customers, investors, communities, and concerned citizens around the world from making moral judgments about the behavior of the companies they deal with.

Indeed, as the size and importance of corporations have increased, so has the general propensity to view their activities through a moral lens. We hardly avoid asking such basic moral questions as: How do companies affect society, and in what ways are their activities beneficial or harmful? Are the benefits they provide sufficient to justify the rights and privileges they enjoy? Do companies respect the rights of others? Is their behavior consistent with basic ethical norms? Given the legal history just referred to, it may seem ironic that people today sometimes seem more inclined to focus their moral concerns on corporate behavior than on individual behavior in private life. The tendency, though, is understandable, given the extensive role played by companies in society today.

Excerpted by permission from Value Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance, McGraw-Hill, 2002.


1. "The Millennium Poll on Corporate Social Responsibility," executive briefing, conducted by Environics International, Ltd., in cooperation with the Prince of Wales Business Leaders Forum and the Conference Board, 1999, PDF File (March 5, 2002).

2. Aaron Bernstein, "Too Much Corporate Power?" BusinessWeek, September 11, 2000, p. 149.

3. As quoted in Christopher D. Stone, Where the Law Ends: The Social Control of Corporate Behavior, 2d ed. (New York, N.Y.: Harper & Row Publishers, 1975), p. 3. A slightly different version is quoted and attributed to Edward, First Baron Thurlow (1731-1806), Lord Chancellor of England, in John C. Coffee, Jr., "'No Soul to Damn: No Body to Kick': An Unscandalized Inquiry into the Problem of Corporate Punishment," Michigan Law Review, vol. 79 (January 1981), p. 386: "Did you ever expect a corporation to have a conscience, when it has no soul to be damned, and no body to be kicked?"

4. In The Case of Sutton's Hospital, Sir Edward Coke (1552-1634) wrote, "They [corporations] cannot commit treason, nor be outlawed nor excommunicate, for they have no souls." 10 Coke Report 1a, 77 Eng. Rep. 937 (Exchequer Chamber, 1613).

5. See generally Bishop Carleton Hunt, The Development of the Business Corporation in England, 1800-1867 (Cambridge, Mass.: Harvard University Press, 1936).

6. See John Dewey, "The Historic Background of Corporate Legal Personality," Yale Law Journal, vol. XXXV no. 6 (April 1926), pp. 655-673, at 665. For challenges to this attribution, see sources cited in William W. Bratton, Jr., "The New Economic Theory of the Firm: Critical Perspectives from History," Stanford Law Review, vol. 41 (July 1989), pp. 1471-1527 at note 151.

7. On the Pope's logic, see Coffee, "No Soul to Damn."

8. Trustees of Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518, 636 (1819).

9. Joseph S. Davis, Essays in the Earlier History of American Corporations (Cambridge, Mass.: Harvard University Press, 1917), II, 8, 22, quoted in Oscar Handlin and Mary F. Handlin, "Origins of the American Business Corporation," Journal of Economic History, vol. 5, no. 1 (May 1945), pp. 1-23 at p. 4. Another historian puts the number of special charters creating corporations in the states during the period 1780-1801 at 317, 96 percent of which were of the public-interest variety. See James Willard Hurst, The Legitimacy of the Business Corporation in the Law of the United States, 1780-1970 (Charlottesville, Va.: The University Press of Virginia, 1970), p. 17.

10. By the end of the nineteenth century, limited liability had come to be seen as an essential attribute of the corporate form. On the origins of limited liability, see Handlin and Handlin, "Origins of the American Business Corporation," pp. 8-17.

11. Bank of the United States v. Deveaux, 9 U.S. (5 Cranch) 61 at 86 (1809). This case was subsequently overruled and the corporation deemed in law a citizen of the state that created it. See Louisville, Cincinnati & Charleston Railroad v. Letson, 43 U.S. (2 How.) 497 at 557-558 (1844). For discussion of this development, see Herbert Hovenkamp, "The Classical Corporation in American Legal Thought," 76 Georgetown Law Journal 1593 (June 1988) at 1598-1599.

12. For a detailed discussion and analysis, see Morton J. Horwitz, "Santa Clara Revisited: The Development of Corporate Theory" Chap. 3 in The Transformation of American Law 1870-1960 (New York, N.Y.: Oxford University Press, 1992), pp. 65-107. For the story of the parallel development in England, see Hunt, Development of the Business Corporation in England.

13. See George Heberton Evans, Jr., Business Incorporations in the United States 1800-1943 (New York, N.Y.: National Bureau of Economic Research, 1948), pp. 3, 10.

14. Ibid., p. 35. See also Hunt, Development of the Business Corporation in England.

15. For a full account of the evolving concept of the corporation, see Hovenkamp, "Classical Corporation in American Legal Thought."

16. For description and analysis of these legal developments, see Hovenkamp, "Classical Corporation in American Legal Thought."

17. The subject of the corporation's moral personality is broached in a 1903 lecture by Frederic William Maitland, "Moral Personality and Legal Personality," which appears in The Collected Papers of Frederic William Maitland, vol. III, ed. H. A. L. Fisher (Buffalo, N.Y.: William S. Hein & Company, 1981), pp. 304-320.

18. For an effort to sort out the morass, see Dewey, "Historic Background of Corporate Legal Personality," pp. 655-673. See also Max Radin, "The Endless Problem of Corporate Personality" Columbia Law Review, vol. 32 (1932), pp. 643-667.

19. See Horwitz, Transformation of American Law, pp. 100-105.

20. A. A. Berle, Jr., Preface to Adolf A. Berle, Jr., and Gardiner C. Means, The Modern Corporation and Private Property (New York, N.Y: Commerce Clearing House, Inc., 1932), p. v.

21. For this suggestion, see E. Merrick Dodd, "For Whom Are Corporate-Managers Trustees?" Harvard Law Review, vol. XVL, no. 7 (May 8, 1932), pp. 1145-1163 at 1160.

22. See Theodore Levitt, "The Dangers of Social Responsibility" Harvard Business Review (September-October 1958), pp. 41-50.

23. For a thorough account of the evolving concepts of the corporation in the United States, see Bratton, "The New Economic Theory of the Firm."

24. For an account of the corporate responsibility debate of the 1970s, see Fred D. Baldwin, Conflicting Interests: Corporate-Governance Controversies (Lexington, Mass.: D.C. Heath and Company, 1984).

25. Milton Friedman, "The Social Responsibility of Business Is to Increase Its Profits," New York Times Magazine, September 13, 1970, p. 33.