Equity and Management

In 1932, Berle and Means wrote “The Modern Corporation and Private Property” which warned of the phenomenon of growing corporate power and a rising managerial class taking over control of these corporations.   The phenomenon caught the attention of sociologists during that time resulting in debates as to form and occurrence and again in the 1960’s (Mizruchi, M., 2004).   Various economic and political theories developed from observations of what seem to be a universal trend separating corporate ownership from control by professional managers.   Leslie Hannah (2007) reviewed the findings of Berle and Means and sought to make clarifications in his article “The Divorce of Ownership from Control from 1900 onwards: Re-calibrating Imagined Global Trends.”   Hannah reviewed the corporate equity structures of significant corporations in the early 1930’s in the United States, England, France and Germany.   He noted similarities and differences in equity structure in the 1900s and found that owners were holding on to substantial shares and consequently maintain control of their corporation.   Equity structure regulations of various countries allowed owners to retain significant stocks with voting rights holdings.   There were exceptions, especially when governments step in to nationalize industries, as in the case of the railways.   Exceptions also arose when regulations on equity ownership allowed very wide dispersal of stock ownership, but this was the exception rather than the rule.  

Hannah concluded the trend identified by Berle and Means was not the rule.   There are many corporations today, particularly in the manufacturing and mining industries, still run by controlling interests from same families that ran said corporations in the early 1900s.   Hannah argues that there has been no “decisive transition” towards the separation of ownership and control but there has been a significant shift towards this trend in different industries in different countries.