The Separation of Ownership and Control
Document Type
Book Chapter
Publication Date
10-1-2014
Abstract
Although the “separation of ownership and control” will forever be associated with Berle and Means’s Modern Corporation and Private Property, neoclassical economics actually developed a much more durable and pervasive concept of separation. Beginning with Yale economist Irvin Fisher’s “separation theorem” early in the twentieth century, modern economics developed one theory after another strengthening the proposition that the “firm” behaves as a distinct economic entity whose only goal is to maximize its value. To the extent individual shareholder wishes differ, they are ignored. The biggest differences were normative. To institutionalist economists, Berle and Means and other Legal Realists separation entailed corporate abuse, unconstrained power, and inefficiency. By contrast, for neoclassicists the firm unleashed from its shareholders became a great engine of efficiency.
Keywords
Berle and Means, corporation, shareholder, separation theorem, Irvin Fisher
Publication Title
The Opening of American Law: Neoclassical Legal Thought, 1870-1970
Repository Citation
Hovenkamp, Herbert, "The Separation of Ownership and Control" (2014). Book Chapters. 69.
https://scholarship.law.upenn.edu/faculty_chapters/69
https://doi.org/10.1093/acprof:oso/9780199331307.003.0010
DOI
https://doi.org/10.1093/acprof:oso/9780199331307.003.0010