Managerialism
Adolf Berle and Gardiner Means - The Modern Corporation & Private Property.
Even though it has its critiques, it remains central to Company Law Theory...
Managerialism outlines that dispersed ownership + shareholder passivity
= separation of ownership + control
(shareholders) (management)
5 Types of Control
• Control through almost complete ownership
• Majority Control
• Control through legal device without majority control (Pyramid System)
• Minority Control
• Management Control
Separation of management & control leads to management becoming a ‘self- perpetuating body’... with corporate management left to pursue their own interests of prestige/power/profits.
THIS CONTROL MEANS THEY ARE UNACCOUNTABLE to those who they are MEANT to represent...
Herman revisited the thesis...
Argued that managerial discrection (to do other things than SHH wealth max) and power were true
Argued approach to ‘power’ = unsophisticated... with the view there was or was not managerial control... no context of its limits.
HERMAN introduced theory of CONSTRAINED MANAGERIAL CONTROL - Managerialism could exist but it has its constraints.
A ‘Strategic Position’ in terms of high occupancy in comp, was a source of control...
‘Control’ = Ability to make key decisions in an organisation
Financial Institutions exercise powerful constraints over management
Impact of managerialism on corps difficult to access among the OTHER influences that may be present on how corps are run
Said Berle and Means fear: managers would use their position of maximising shareholder profits... to benefit themselves: prft /power/prestige were wrong.
In the modern context, dispersed ownership companies with DRs having managerial control... are still committed to corporation’s growth w/ shareholder primacy... max SH/H value... due to internalisation of profit maximisation criteria in corporate cultures and internal operating rules
This commitment to it is the same that would be in a shareholder owned corp.
The Managerialism Thesis is still relevant
o Still applicable notion of DR’s discretions and power in nations with highly dispersed ownership companies. E.G. USA + UK
o Not applicable in nations of concentrated ownership i.e. Germany/Japan
Defects of the Managerialism thesis
o Hermans Critique unsophisticated notion of ‘power’... didn’t identify its limits
o Ignorance of how good implementation of D.D. common law would impact on ‘power’
o Institutional Shareholder influence not taken into account... ability to constrain the ‘power’ and management discretion
o Public feeling at the time... following great depression... blaming it on managerialism... `
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