Ernst Freund as precursor of the rational study of corporate law

2017

SSRN Journal

Self Cite

The rise of large business corporations in the late 19th century compelled many American observers to admit that the nature of the corporation had yet to be understood. Published in this context, Ernst Freund's little-known The Legal Nature of Corporations (1897) was an original attempt to come to terms with a new legal and economic reality. But it can also be described, to paraphrase Oliver Wendell Holmes, as the earliest example of the rational study of corporate law. The paper shows that Freund had the intuitions of an institutional economist, and engaged in what today would be called comparative institutional analysis. Remarkably, his argument that the corporate form secures property against insider defection and against outsiders anticipated recent work on entity shielding and capital lock-in, and can be read as an early contribution to what today would be called the theory of the firm.

Section: Introductionmentioning

confidence: 99%

Ernst Freund as Precursor of the Rational Study of Corporate Law

2017

SSRN Journal

Self Cite

“…In the final contribution to the symposium, David Gindis (2017) shows that these ideas were anticipated at the turn of the 20th century by Ernst Freund, whose recognition as an important yet neglected corporate theorist is long overdue. Freund's The Legal Nature of Corporations , published in 1897, was written at a time when the rise of large business corporations compelled many American observers to admit that the nature of the corporation had yet to be understood.…”

mentioning

confidence: 99%

Conceptualizing the business corporation: insights from history

Journal of Institutional Economics

2020

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The purpose of this symposium is to shed light on the genealogy of the idea of a business corporation, an economic institution which has long been regarded with a mixture of awe and apprehension. Each of the four original contributions addresses the history of some of its key features. In the process, each contributor reveals some of the insights that history has to teach us regarding the central concepts that inform contemporary debates about the nature of the corporation, the contours of the corporation's purpose, the sources of corporate power, the functions of corporate law, the duties of directors, the status of shareholders, and the legitimacy of corporate rights.

What is a firm? A reply to Jean-Philippe Robé

Deakin

Journal of Institutional Economics

Hodgson

2021

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In his recent book on Property, Power and Politics, Jean-Philippe Robé makes a strong case for the need to understand the legal foundations of modern capitalism. He also insists that it is important to distinguish between firms and corporations. We agree. But Robé criticizes our definition of firms in terms of legally recognized capacities on the grounds that it does not take the distinction seriously enough. He argues that firms are not legally recognized as such, as the law only knows corporations. This argument, which is capable of different interpretations, leads to the bizarre result that corporations are not firms. Using etymological and other evidence, we show that firms are treated as legally constituted business entities in both common parlance and legal discourse. The way the law defines firms and corporations, while the product of a discourse which is in many ways distinct from everyday language, has such profound implications for the way firms operate in practice that no institutional theory of the firm worthy of the name can afford to ignore it.