The Modern Corporation and Private Property by Adolph A Berle, Jr
"The Modern Corporation and Private Property" is a pivotal work that examines the evolution of corporations from small, family-run entities in the nineteenth century to large, powerful organizations by the early 1930s. Authors Adolph A. Berle, Jr. and Gardiner C. Means delve into the critical shift from ownership to management, highlighting the increasing separation between those who own corporate shares and those who manage the corporations. This separation raises concerns about potential misalignment of incentives, where managers and boards may prioritize their interests over those of the shareholders. The book advocates for enhanced voting rights for shareholders, greater transparency from management, and regulatory measures to protect shareholder interests. Berle and Means also suggest that corporations should embrace a broader social responsibility, recognizing their significant role in the economy and society. The impact of their analysis is profound, reshaping the perspectives of businesses, investors, and regulators, and influencing modern corporate governance practices. This work is considered essential reading for understanding the complexities of corporate management and law.
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The Modern Corporation and Private Property by Adolph A Berle, Jr.
Identification Book about corporate management
Authors Adolph A. Berle, Jr., and Gardiner C. Means
Date Published in 1933
Influential treatise by key players in the creation of the New Deal arguing that modern corporations consisted of managers and directors who often did not act in the best interests of the real owners of corporations: the stockholders. The authors also proposed a broader social role for the corporation beyond the mere pursuit of profits. This book was the impetus for laws and regulations that govern corporations.
The Modern Corporation and Private Property is the most influential book in the field of corporate governance. This important book was written by Adolph A. Berle, Jr., a professor of corporate law at Columbia who also worked for President Franklin D. Roosevelt, focusing on the New Deal. His coauthor was Gardiner C. Means, an economist at Harvard University.
The book analyzed how corporations had evolved from the nineteenth century, when they were primarily small operations owned and operated by an identifiable number of individuals, often family members. By the early 1930’s, average corporations had grown considerably; they were large and powerful enterprises with enormous numbers of shareholders who bought and sold their shares on stock exchanges. Typically, no one shareholder owned more than a tiny fraction of the shares of the company.
Berle and Means introduced the concept of the separation of ownership and management in describing the modern corporation. They stated that the real power lay in the hands of managers and boards of directors who typically owned only small amounts of stock in the company. The small number of insiders (managers and directors) had greater knowledge and incentives that differed from those of the large number of outsiders (the shareholders) and could operate the company for their own benefit, potentially harming the shareholders and the corporation itself.
The book argued for increased voting rights for shareholders, increased disclosures by management, and other controls for the benefit of the shareholders. The authors also proposed a broader social role for the corporation as a key institution in the modern economy and society.
Impact
The Modern Corporation and Private Property changed the way businesses, investors, lawyers, and government regulators looked at corporations. It also led to the creation of much of the modern regulation of corporations, their managers, and corporate directors. It remains one of the most cited and relied on texts for experts in corporate management and law.
Bibliography
Kaysen, Carl, ed. The American Corporation Today. New York: Oxford University Press, 1996.
Mason, Edward, ed. The Corporation in Modern Society. College ed. New York: Atheneum, 1980.
Miner, John B. Organizational Behavior: Foundations, Theories, and Analyses. New York: Oxford University Press, 2002.