The New Face of the Corporation

...He concludes that despite the lack of evidence of increased concentration, "there may well have oc-cured a profound change in the way industrial enterprises are managed...

...Even if profits are seen partly as a source of prestige, they are, in the climate of the welfare state, far from being the only source...

...Where before the war it was assumed that a change in ownership was an essential condition of governmental control, today it is realized that control can be made effective without nationalization...

...He points out how large firms are constantly being rebuked in the financial press for their failure to regard high dividends as the primary aim of business activity...

...others, like Eugene Rostow, argue that if they have abandoned it they should not have done so...

...The essays are packed with ideas and data...

...As Mason puts it, "Traditionally the incentives connected with profit maximization have been thought to constitute an essential part of the justification of a private enterprise system...

...While there is some recognition of the validity of Berle's later doctrine that corporate management does not now act exclusively to maximize profits for stockholders but in order to serve a rather diffuse public interest, none of the authors is entirely happy about this...

...Crosland goes on to point out that the private corporation is now recognized as more sensitive to public opinion and social considerations and to the circumscribing counter-power of labor than before the war...

...The three main Berle propositions are summarized by John Lintner in the essay, "The Financing of the Corporation...

...Power Without Property...

...It is impossible, within the space limitations, to do justice to these essays, ranging from those dealing with cognate institutions, such as Neil Chamberlain's "The Corporation and the Trade Union," to a most useful comparative analysis of organizational forms in the Soviet economy in "Industrial Enterprise in Russia," by Alexander Gerschen-kron...

...As he says, "The public corporation does not appear to be satisfactorily accountable to anyone...

...An altered climate of public opinion considerably restricts the bounds of what is socially permissible in business activity...

...Lintner's evidence affords additional support to the reversal among many economists of the opinions so widely held during the Great Depression that competition had declined to the point where American capitalism had undergone fundamental change and where a large measure of governmental intervention and regulation had become inevitable...

...Lintner notes, however, that Berle now recognizes that assets and employment are little, if any, more concentrated in large manufacturing corporations than they were 30 years ago...

...The present volume re-examines the Berle theses as set forth in his first book and as later modified, and are by no means accepted by all the authors of the essays included...

...His The Modern Corporation and Private Property, written with Gardiner C. Means and published in 1932, still serves as a landmark in the progress of public recognition of how fundamentally an economy has changed when the individual capitalist-entrepreneur has become transformed into the corporation with autonomous management...

...Speaking of the private corporation, he says, "Nor is there much sign that the management maximizes profits from an altruistic desire to maximize the income of share-holders...

...Duke University It is appropriate that this volume of essays on the role of the corporation should begin with a foreword by Adolf A. Berle...

...If I have given the impression that these essays have been written solely to examine and then defend or refute Berle's doctrine of the nature of the corporation, this is wrong...

...Granted that management has escaped from the control of the stockholders, as substantially all the authors agree, need anything be done about it and, if so, what...

...Abram Chaves, however, maintains there is little reason to decry the decline of stockholder influence since he maintains that the interests of the stockholder are less vital and are less in need of representation than other parties at interest, such as the workers or the customers of a corporation...

...Of particular interest is C. A. R. Crosland's "The Private and Public Corporation in Great Rritain...

...He goes on to point out that if equity rather than profits is now the corporate objective, one of the distinctions between the private and the public sectors disappears...

...the arguments presented by the authors have "bite...

...The evidence he arrays goes far in denying that the decline in stockholders' power over corporate management has in fact produced "major changes in corporate behavior and performance...

...The second emphasized progressive separation of control from ownership in non-financial corporations and the resulting centralization of economic and financial power within these corporations in the hands of small management groups increasingly free from stockholders' influence and classical market constraints...

...Indeed, he maintains that in all non-financial corporations they are even less concentrated...

...Yet as Edward S. Mason points out in his introductory chapter, those who doubt the significance of the "managerial revolution," on the basis of the failure of the share of economic activity controlled by the largest corporations to grow any faster than has the economy as a whole, cannot thus simply dispose of the matter...

...Some deny, like Lintner, that corporate managers have abandoned profit maximization...

...He proceeds to offer impressive evidence that the managements of corporations do not act as though they were free from classical market restraints even while he recognizes that they are free to a large extent from stockholders' influence...

...The first affirmed increasing concentration in the economic and financial structure of the American economy...

...Concurrently, experience with the public corporation has diminished enthusiasm for this alternative organizational form...

...The third, on the basis of this centralization of power and freedom from constraint, asserted major change in corporate behavior and performance...

...Mason is certainly right and the development of the American corporation has indeed brought about changes profound enough to warrant the devotion of the exceptional powers of analysis of the authors of these 14 essays to the problem of the nature of the modern corporation and of its associated and sometimes competing institutions...

...and the volume will be used as a most valuable source on the nature of the modern corporation for a long time...

...Berle has continued to develop his ideas in this field with his latest book...