The Blip of Interest in the Organic Theory

Abstract

At the start of the 20th century there was a flourish of interest in the theory that the corporation is a kind of organism made out of other multicellular organisms, in the same way multicellular organisms are made out of cellular ones. This theory of the corporation came to be known as the 'organic theory'. The story of this flourish of interest in the organic theory was told by Harvard Law School Professor Morton Horwitz in a 1985 essay called 'Santa Clara Revisited: The Development of Corporate Theory'. Horwitz's account of the flourish of interest has been hugely influential, and, if the story of the flourish is known, it is generally through his work. The argument made by Horwitz in his essay was this: the role of the flourish of interest in the organic theory at the start of the 20th century was to help to legitimate big business. This talk revisits Horwitz's account. It shows that it is, in fact, highly misleading. It shows that the organic theory was never used in the way Horwitz suggests and that, if anything, the effect of the theory was the opposite - rather than helping to legitimate big business, it, in fact, opposed it. Hence, as I discuss, the story of the flourish of interest as understood in current academic discourse requires remedying. This is the text of a talk given at the Corporate Law Teachers Association 2020 conference, hosted by Monash Business School.