Harnessing the Growth of Corporate Capitalism: Sullivan & Cromwell and its influence on late Nineteenth-century American business

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Jason Weixelbaum Publications and Research

December 25, 2010

Harnessing the Growth of Corporate Capitalism: Sullivan & Cromwell and its influence on late Nineteenth-century American business


Historians have long noted that late nineteenth-century America witnessed an “organizational revolution,” which led to an unprecedented concentration of wealth and political power due to the business activity of its growing number of corporations. Thus, a closer look at key organizations that played a role in this process of corporate consolidation can explain the historical dynamics at play. This paper will reveal that the law firm Sullivan & Cromwell was one of these important actors for at least four reasons: It had a major influence in the invention of the “holding company,” which allowed the large trusts to evolve into companies that could evade regulation designed to limit their growing size and leverage; it facilitated the monopolization of America’s railroad industry, which led to some of the most violent labor struggles in the nation’s history; it oversaw an enormous increase of international investment, particularly from Germany, which added major momentum to the growth of certain industrial syndicates like General Electric; and it helped drive major American foreign policy initiatives designed to benefit its commercial clients – for example, by securing investment and legal authorization of the construction of the Panama Canal. Little has been written about Sullivan & Cromwell, and it has produced no comprehensive history of its own, despite the fact that it continues to serve the interests of some of the most powerful corporations today. This paper will argue that, under the direction of William Nelson Cromwell at the end of the nineteenth century, the firm pushed itself into a privileged position among American business and governmental elites, thereby setting a precedent for its influence in later eras.

The explosive growth of corporate business in late nineteenth-century America in many ways defines the period. Terms like “the Gilded Age” or “Robber Barons” symbolize the enormous consolidation of wealth and power in the hands of the few.[1] These expansive corporate conglomerates set precedents for labor relations, national politics, and business practices. Today, we live in a world shaped in part by the actions of, and responses to corporate business. Therefore, it is imperative that we continue to study the development of these activities in order to better understand the present.

If we are to assume that corporate expansion was among the most important features of late nineteenth-century America, who were the central actors in this period? While corporations may have been busy building and buying up factories and railroads, who facilitated this process? One key group worth a closer examination are lawyers. Not only were they the envoys between powerful interests, governmental organizations, and citizens, they were also often times the directors and managers of the corporations themselves. According to legal scholar Walter Werner, the battle for control of the American business landscape was every bit as profound as the worker struggles that were spawned by it. Werner states, “Corporate control is a topic dear to the hearts of lawyers. They are the generals – and courts often the battlegrounds – in struggles for the control of economic empires.”[2] In an appraisal of the most important and influential of these “generals,” the law firm Sullivan & Cromwell looms large.

From its humble beginnings interpreting wills and mortgages in the late nineteenth-century from its offices in New York City, Sullivan & Cromwell’s client list has grown into a veritable “who’s who” of the most influential corporations in American history. The firm has a long standing historical relationship with many major banks, including JP Morgan and the Chase Bank. Sullivan & Cromwell has also served the interests of several large industrial conglomerates, including Standard Oil, General Motors, and Ford Motor Company. As of November 2010, the firm has been working with its longtime client, British Petroleum, to offset the costs associated with the enormous oil spill the energy company caused in the Gulf of Mexico earlier in the year.[3] The question then remains: How did Sullivan & Cromwell come into a position of collaborating with such powerful business interests?

Late nineteenth-century America was a crucial time for Sullivan & Cromwell, and for corporations and lawyers more generally, who experienced a dual revolution: an organizational revolution and a corresponding legal revolution. The legal revolution manifested itself in legislative attempts, both at the state and federal level, to control the tremendous growth of corporate capitalism. These efforts were challenged in America’s courts by corporations seeking to circumvent regulation, which led to the creation of new legal protections for monopolistic business practices by business-friendly judges.[4] On the other side, the organizational revolution was more subtle; one of the most widely influential human technologies, the bureaucracy, created wide-ranging, efficient new structures that were able to dramatically expand the capabilities of business institutions. Legal historian Charles Perrow noted that the ubiquity of bureaucracies has created a unique problem for historians and requires some digging in order to expose their historical significance: “In many accounts of social change, wealth and power are not associated with organizations; wealth is resident in an individual, a family or a class, and power is resident in persons or ideologies. Organizations are at best unproblematic resources for other expressions of wealth and power.”[5] In other words, bureaucratic structures are embedded in our everyday experiences, and special attention is needed by historians to tease out their activities in relation to larger historical dynamics. Little has been written about Sullivan & Cromwell for precisely this reason; significant effects of the law firm’s activities fall mostly within the purview of its clients’ businesses, rather than demonstrating the significance of the firm’s role in both of these revolutions.

The purpose of this paper is to analyze the importance of Sullivan & Cromwell, despite its relatively light historical treatment, as an instrumental organization in driving government policy, legal precedents, and business practices in late nineteenth-century America. Through its business activities, this paper will argue that the firm came to occupy a privileged position among governmental and corporate elites, setting a precedent for its influence in later years. Three aspects of Sullivan & Cromwell’s work distinguished it from its peers by the turn of the twentieth century: The legal invention of the “holding company,” which encouraged tremendous corporate growth; the consolidation of industries, as with the Northern Pacific Railroad as a case study; and the firm’s cooperation with the U.S. government to secure investment and diplomacy in the development of the Panama Canal. In all three cases it will be demonstrated that Sullivan & Cromwell, under the purposeful management of William Nelson Cromwell, became a uniquely powerful player in this process, well beyond any comparable institutions.

A brief analysis of the relevant historiography will help lay the groundwork for this argument. Texts that reference Sullivan & Cromwell directly are few. The only detailed (and unauthorized) history is A Law Unto Itself: The Untold Story of Sullivan & Cromwell by legal scholars Nancy Lisagor and Frank Lipsius.[6] Lisagor and Lipsius have charted out a somewhat comprehensive history of Sullivan & Cromwell, attempting to position the firm among other venerable American legal institutions in the 1980s. For this reason, brief analysis is given to the firm’s early years in the late nineteenth-century in favor of its twentieth-century activities. Additionally, this paper will provide some contrast to Lisagor and Lipsius’ work by isolating the voice of William Nelson Cromwell in order to provide some critical analysis of his personal intentions for the early course of the firm. Sullivan & Cromwell itself has provided a handful of self-published material, including a biography of Cromwell, which understandably portrays him and the firm in a positive light.[7]

Other texts are useful in providing the legal, business, and political contexts of the period. Works of legal history, which argue for the significance of innovation and effects of corporate law are quite numerous and varied.[8] Corporations and Society: Power and Responsibility, a collection of essays by legal historians such as Martin J. Sklar, Michael Horwitz, Aviam Soifer, and Samuel Loescher is a useful text for explaining the legal development of the corporate business model and exploring the moral implications of this structure. The main drawback of the work, and others like it, is that its focus is on court cases and legal precedents, rather than on the law firms themselves as significant historical actors.

Legal history intersects haphazardly with business history as well, producing a diverse backdrop for the study located here. One of the classic texts associated with American business history is The Visible Hand: The Managerial Revolution in American Business, by Alfred D. Chandler, Jr.[9] Chandler provides a highly detailed history of the development of corporate models of mass production and the associated development of modern management structures. Problematically, critiques of the socio-political effects of this activity are almost completely absent in the text. Drawing inspiration from Chandler, Big Business and the State by Harland Prechel and Constructing Corporate America: History Politics, Culture, which is another collection of essays edited by Kenneth Lipartito and David B. Sicilia, both provide a more revisionist approach to the field of American corporate law, but also do little to isolate law firms as instrumental participants.[10]

American nineteenth-century political history has a rich and varied historiography that can help elucidate the political climate in late nineteenth-century America and are worthy of integrating into the argument presented in this paper.[11] Recent histories have helped provide agency to workers in response to employer abuses, such as Labor and Urban Politics: Class Conflict and the Origins of Modern Liberalism in Chicago: 1864-1897, by Richard Schneirov, is a detailed account of the relationship between party politics, labor, and political machines.[12] A recent useful work that attempts to create a synthesis of earlier histories and provide a socio-political overview for the period is A Government Out of Sight: The Mystery of national Authority in Nineteenth–Century America by Brian Balogh.[13] While neither of these texts mentions Sullivan & Cromwell directly, both analyze important industries, popular movements, and prominent politicians that will be described here. Therefore, the task of this paper is to integrate Sullivan & Cromwell into these larger historical narratives.

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