This monumental work on the corporation is one of those enduring classics that many cite but few have read. Graced with a new introduction by Weidenbaum and Jensen, this new edition makes this classic available to a new generation. Written in the early 1930s, The Modern Corporation and Private Property remains the fundamental introduction to the internal organization of the corporation in modern society. Combining the analytical skills of an attorney with those of an economist, Berle and Means raise the central questions, even when their answers have been superseded by changing circumstances.The book's most enduring theme is the separation of ownership from control of the modern corporation and its consequences. Berle and Means display keen awareness of the divergent interests of directors and managers, and of each from owners of the firm. Among their predictions are the characteristic increase in size of the modem corporation and concentration of the economy. The authors view stock exchanges and stock markets as essential by-products of the rise of the modem corporation, and explore how these function. They address the difficult questions of whether corporations operate for the benefit of owners or managers, and explore what motivates managers to make effective use of corporate assets. Finally, they examine the role of the corporation as the prevailing form of organizing the production and distribution of goods and services.In their new introduction, Weidenbaum and Jensen, co-directors of the Center for the Study of American Business at Washington University, critically assess the impact of developments not fully anticipated by Berle and Means, such as the rise of the service sector, and the significant role played by institutional investors in the owner/manager equation. They note the authors' prescient observations, including the complex role of and motivating influences on professional managers, and the significance of inside informatio

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property itself, still immobile, still there, still demanding the service of human beings, managers, and operators. Related to this is a set of tokens, passing from hand to hand, liquid to a degree, requiring little or no human attention, which attain an actual value in exchange or market price only in part dependent upon the underlying property. Into it enter elements which are not normally admitted to be elements in the value of the latter. The tokens may, for instance, represent in their value an appraisal of the supposed ability of the particular man­ agement interposed between the properties and the owners. A first-rate manager would not increase the values of the properties were they to be sold; but he will cause an increase in value of tokens represent­ ing that property. A poor management will have an opposite result. Speculative activity may cause the tokens to have a temporarily ab­ normal market price. Or the price may be the result of purely artificial manipulation. Most striking of all, a liquid token acquires a value purely and simply because of its liquidity. Property in non-liquid form is worth one price. Property represented by liquid tokens is worth another price, which may be higher or lower as the bulk of the community demands this liquid quality or avoids it. The privilege of being able to borrow upon property at once, or the ability to turn it into cash on twenty-four hours’ notice may in itself be worth paying for and thereby enhance the value of the token. Or the very sensitiveness of the value of liquid property to unreasoned surges of popular fear may detract from its value. Finally, as the token becomes more and more separated from the physical properties through the interposition of managements and their endowment with legal power which can be traced through to the physical assets, the "jus disponendi” over the physical property ceases to be in the owner of the token. His real right of disposition is a right of disposition over the token itself, over any returns which may be distributed to him, and over the proceeds of its sale. He has, in fact, exchanged control for liquidity. It is thus plain that the concept of a share of stock must now be vigorously changed. No longer can it be regarded, from the point of view of the investor as primarily a

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which may fairly be considered as a representation that matters have already been so arranged that on completion of the issue, the corporate structure can be made to conform with the description given. But the great question in this area has to do with the price. In a sense, no disclosure can be either complete or accurate, since the pon­ derables and imponderables all combine into one picture, not suscep­ tible of being accurately reduced to words. The estimate of all the facts, important and unimportant, salient and obscure, demonstrable and otherwise, finds a summation in the banker’s own appraisal of the worth of the security, which is, of course, embodied in the price at which he offers it. Can it be said that the price is a representation of value? If a banker offered stock at $100 per share when in fact it is worth less when appraised by the market standards of the day, has he told a lie with intent to deceive? On this the law is still in the making; but there is some reason to believe that the result will hold the banker to some accountability in this regard. The law has always made a distinction between a sale by one purporting to be an expert in the value of the thing sold and sales made by a mere outsider. Thus, if a passerby finds a jewel and offers it for sale at $1,000 as and for a diamond but claiming no special knowledge of it, he is not held to have represented that he knew its value to be that of the price asked. Tiffany doing the same thing, would probably be dealt with under a different rule; as an expert in jewels, that house offering a jewel for sale as a diamond and for a thousand dollars would impliedly at least represent that they knew it to be a diamond and that its value was in the vicinity of the price asked. A banker is an expert in se­ curities and presumably an expert in the security offered; falling in this respect more nearly in line with Tiffany than with the bystander. In at least one recent case, it was held that a syndicate who recom­ mended the purchase of securities at a price on the ground that they were a good investment had in fact made a representation that the securities were fairly worth the price and this proving to be false, gave rise to an action by the buyer. The trouble with this situation of course rests in the difficulty of “worth.” In a violent market, securities may be appraised by the general public as worth far more than the sounder judgment of a quieter time would apprehend. Is the banker to be guided by the standards of a speculatively crazed market, and make the appraisal accordingly? Or must he abide by the better economic judgment of his own expert staff? If the former, he may be consciously taking ad­ vantage of a temporary phase of folly; if the latter, he will find that a security offered by him at $100 is traded in tomorrow at $150, outsiders

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Mergers of Big Companies1 1922-1929

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Main Fields of Investment

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Main Fields of Investment (Continued)

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Income from Property

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Income from Property (Continued)

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American Telephone & Telegraph Company

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United States Steel Corporation