ABSTRACT
In a book published some 70 years ago, Berle and Means (1932) make a striking observation: that among the US’s biggest and most successful companies, ownership is often separated from control, that is, managers rather than owners have effective control over companies. The observation is puzzling: if private property is the basic concept on which the whole capitalist system rests, and if the US is capitalism’s paradigmatic and most successful example, then how come, in its very core, private ownership vanishes? Much of the modern thinking about business organisation may be perceived as an attempt to resolve the Berle and Means puzzle. Some have tried to uncover the mechanisms through which owners may regain control, for example when a company is taken over; see Manne (1965) and a flood of papers since then. Some have argued that bureaucracy, rather than ownership, is the basic building block of capitalism; see Marschak and Radner (1972). Yet others have argued that the separation of ownership and control is an aberration from which capitalism is bound to revert; see Jensen (1989). Though Jensen’s predictions were obviously premature, they might materialise in the future in response to some spectacular corporate revolution.
