ABSTRACT
The initial corporate charters were very specific with regard to the kind of activities the corporation could engage in. If the management of a company founded to make rifles wished to diversify into making pots and pans, or to purchase another company that made pots and pans, it would require the approval of its shareholders. William Baumol once observed that whenever he asked a business manager how business was, the manager responded by describing recent movements in sales. A manager's first thought was of sales rather than of profit. Oliver Williamson once observed that white-collar employment for some companies with volatile demand schedules varies more over the business cycle than their blue-collar employment. Marris suggested that the constraint on managerial pursuit of growth was the threat of takeover and dismissal. This threat increases as managers in pursuit of growth invest at greater levels than would maximize shareholder wealth.
