The Modern Corporation and Private Property
, written in 1932 by Adolf Berle
and Gardiner Means
, suggested that the increasing impact and concentration of corporate power is at the heart of many of the problems with the capitalist system. The basic problem is that the organization
of the modern corporation separates corporate ownership
from corporate control. In general, corporations
are not run by their owners, the stockholders
, but by professional managers. With increasing stock ownership, ‘control is maintained in large measure apart from ownership
’ (Berle and Means, 1932, p. 117), and owners do little more than ‘supply the means whereby the new princes may exercise their power’
(p. 124). This example of a principal-agent problem
helps explain the current Great Recession, and it presents a reason to consider increased regulatory scrutiny and information transparency.
In Means’ 1962 book, The Corporate Revolution in America, he opined:
We now have single corporate enterprises employing hundreds of thousands of workers, having hundreds of thousands of stockholders, using billions of dollars’ worth of the instruments of production, serving millions of customers, and controlled by a single management group. These are great collectives of enterprise, and a system composed of them might well be called “collective capitalism.”
An economy controlled by huge corporate interests makes for a country controlled by the interests of their managements, not the public at large.