The Separation of Ownership and Control

Document Type

Book Chapter

Publication Date



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.


Berle and Means, corporation, shareholder, separation theorem, Irvin Fisher

Publication Title

The Opening of American Law: Neoclassical Legal Thought, 1870-1970