Adolf A. Berle

Adolf Augustus Berle ( born January 27, 1895 in Boston, Massachusetts, † February 17, 1971 in New York City ) was an American politician, lawyer, university professor and author of several books on the American economy.

Life

After his undergraduate (1913) and his Master ( 1914) from Harvard College and a degree from Harvard Law School ( 1916), he worked in a Boston law firm. Later he was a member of the American Commission to negotiate peace with Germany (1918). From 1927 to 1964 he was Professor of Corporate Law ( corporation law) at Columbia Law School. From 1933, he began a career in government service. He was a member of the so-called brain trust in the early years of U.S. President Franklin D. Roosevelt ( a group of professors who advised the President ), a consultant at the Good Neighbor Policy, a consultant in the Reconstruction Finance Corporation ( 1933-1938 ), Deputy Foreign Minister (1938-1944), Ambassador to Brazil (1945-1946), Chairman of the task Force on Latin America ( 1961), Advisor to the Secretary of State ( 1961-1962 ), U.S. delegate various Pan-American conferences and President of the International Conference on Civil Aviation. As secretary of state he prepared the reorganization of the FBI through the establishment of the Special Intelligence Service ( SIS), the foreign intelligence department to 's Technology intelligence in close collaboration with John Edgar Hoover 1940. Remarkably thereto was that this decision was taken at the direction of President Franklin Delano Roosevelt subconscious exclusion of actually mandatory to participate in it constitutional bodies.

Works and themes

No American jurisdiction has been so dominated by a single work as the U.S. corporate law by The Modern Corporation and Private Property ( 1932). Here present Berle and his co -author, the economist Gardiner C. Means, an analysis of the American economy and show that the means of production are mainly in the hands of the 200 largest corporations. They also show that this concentration increases and that there is a clear separation of ownership and control in the company. It was previously thought that one of something in the property also has the right and has the power to use it to his advantage. Berle and Means contradict this assumption, and show a new image of the private companies.

In two later works (. The 20th Century Capitalist Revolution (eng: 1954 ) - The capitalist revolution of the twentieth century (eng: 1958 ), and Power without Property (eng: 1959 ) - power without property (Ger.: 1967 ) ) works Berle out the thesis that the management of large companies - along with the fact that they have also removed the control of its shareholders - has achieved enough power to break free by the market and its competition itself. He concludes, therefore, that the old theories of the market and the competition, are caused by the accumulation of great power in the hands of corporate management today obsolete. This provocative thesis provides still plenty of debates.

The Modern Corporation and Private Property

Berle and Means, the thesis that development corporations ( corporations ) to the dominant form of organization of modern society. Background is the advent of the modern large corporation and as a result the formation of the multi- product company. The distribution of ownership to many share owners by Berle and Means leads to a loss of control of the newly created class of managers. The actual control over the company is in the managerial capitalism, while the marginalized supervisory bodies and share owner in extreme cases the management decisions (only ) can passively rubber-stamp. The described in the book agency relationship between management and shareholders already outlined essential core areas of U.S. corporate governance. Berle / Means develop solutions to the so-called principal-agent problem: the business leaders (agents) do not always follow in the management of the company have the same interests as the company owners ( principals ). One result of the study was the recognition that economic pressure drives the evolution of corporate law and capital market law.

The capitalist revolution of the XX. century

Corporations today have an economic and social responsibility. You have come involuntarily in this position of power and responsibility. Capitalism is therefore not a way of life ( way of life ), but a method of obtaining economic and social results. The general public benefits from the American capitalism through mass production and distribution. Louis Hacker ( Columbia University) speaks here also of the " triumph of American capitalism ," since there is no " poverty " as it prevails elsewhere. As an example, Berle leads to the October Revolution of 1917: According to the Tsarist Russia was still living backward, while Western Europe and America from the technical and economic progress ( 19th century) benefited. In his opinion, these areas now aspired to the results and benefits of the industrial revolution. This Berle is contrary to Marx ( which capitalism must first be overcome ).

Yet, he finds parallels between socialism and corporations. So over all powers is an investor to work in a corporation of line with the capital to produce and develop. They (the person) but has no control over the product. For this it has a limited right to a share in earnings ( dividend). But there is no own ( creative and productive ) work more (such as the farmers on their own ranch ). Under socialism, the holder and owner of the production goods of the State, a public authority or the society. The citizen receives a salary or a pension. The planning, development and manufacture lies in state hands. However, the individual receives a share of the product ( wage ).

The shareholders of the line ( inevitably ) to the Board. ( " One million shareholders could not simultaneously conduct a group. " ) It comes to a division of property: receive Shareholders and produces the line. However, the line has now power.

• Towards the staff ( recruitment, dismissal, wages, working conditions)
• Supply of markets (eg electricity in rural areas)
• Development of cities and regions (electricity to the country, factory building )
• They determine the pace of development

Here, you will inevitably come to the question of whether you can limit the power, eg by external factors such as public opinion.

According to a study from the year 1953 on the sources and use of the capital stock of National City Bank betw 1946 and 1953, approximately $ 150 billion investment have accumulated. This share, however, as follows:

• 64 % from internal sources ( revenue, profits, retained dividend)
• 18% of banks (current liabilities)
• 12 % of bonds, notes ( against insurance companies and syndicates )
• 6% of shares (but almost half of preference shares)

So there are no real obstacles to the power of corporations. You do not have to leave it almost necessary to evaluate the capital market. Prior to this test done yet by banks and investment firms, today, the directors and managers are responsible only to their conscience against. ( In the last chapter, however, Berle says restrictive that the state has control and steering options. If this heralds to lay electricity to the country, then, the companies move to the state competition to come up before. ) Nevertheless, this state has the pace of progress even encouraged. So banks are more conservative in their assessment, while the managers know their business and promote research and development rather.

A further concentration of economic power is limited by two factors:

• Horizontally through competition within the industry
• Vertically through competition with other goods ( eg: high price of coal transport oil consumption, high railway rates promote transport by road )

Power without property

The managers are responsible to four groups

• Community of buying their society
• Sold to the Community their society
• The employees of the company
• And the securityholder

Thus they have a larger electorate than many politicians. The businessman of today thus gets more power available than justifies its position in society. ( As an example, he cites the financier, the one sent to a brain surgery. Course, this is utter nonsense and should rather be done by a surgeon. However, when it comes to whether trade with China is conducive to peace, the manager may decide although this decision is not less supporting. )

Both de facto and de jure is meant by ownership such thing that you can own; that is, limited and controlled by an individual or individuals, the owner. The growth of the social system but changing the image of the owner.

As long as the business and the company remained small, certain shareholders to a large extent on what had to do the line. Use the Greater Will the company shows that the company known as a legal entity appears as the owner of the property. The property, originally the flag of the owner, now went over to the managers. This property is no longer the relationship man - thing but man - man. The other man Subsidiary has actual control of the matter. It's now about power without property! ( As an example, he cites a (possibly fictitious ) anecdote. Accordingly, the night watchman of General Electrics kicked the president of the company, because it knew him not. The night watchman was on this evening the owner of the company and the President was only a representative of an impersonal society of the (legal ) owner. President is therefore only a private citizen with the power to issue commands. )

In the 1960s, there was broad consensus among economists that the managers of large public companies no strategy for own profit maximization pursued, but their primary goal was growth. The separation of ownership and control in large public companies to shield the manager but against the influence of the owner from and gave them considerable autonomy.

In the U.S. in 1960 were still 88 % of the share capital owned by small shareholders and families. These owners were not forced to compete for the highest possible dividend. With the introduction of shareholder value, however, a change of strategy has occurred. Profit maximization is now the dominant goal of the manager.

A limitation and control of economic power is possible by the following factors:

• Unions
• Dependence of competitors, suppliers, wholesale buyers, ...
• Capital loss ( = loss of power )
• Political intervention
• " Public approval " Prestige

The public consensus is the product of a set of thoughts and experiences of public opinion. This can build such a high pressure that politicians intervened. Although this public consensus was still nowhere codified, managers are well aware in every industry its. Berle believed that the time will come in which such policies are required, and are set up. In many areas would be actions and results according to the rules of the law technically allowed, but according to the requirements and principles of public consensus not allowed. After Berle that reflects the reality of economic democracy in the United States.

Summary and Critique

Although scientists such as Berle and Means has faith, ultimately, the owner would have the final say, to this day. One of the basic characteristics of the large companies of the 21st century, however, include a line system that provides power for self- enrichment.

The model of Berle and Means is therefore still relevant in many points. However, there are criticisms. Thus, the limitation of the (economic) power by competing companies and products is no longer met. With rising gas prices, alternative energy would be available already low (vertical limit). Also, the big business is now in the hands of only a few companies, banks or investment funds ( horizontal boundary ). This slowly developing into a new power factor. The best known example of the attempt by the Deutsche Börse AG was to take over the London Stock Exchange. This failed after the intervention of mutual fund Atticus and ITC. The managers are therefore responsible not only to their conscience against.

Bibliography

• The Modern Corporation and Private Property. Commerce Clearing house, New York in 1932, OCLC 422,091,748th ( with Gardiner Means )
• The 20th Century Capitalist Revolution. Harcourt, Brace, New York 1954, OCLC 788 593 256 The capitalist revolution of the 20th century. Grove, Meisenheim a Glan 1958 DNB 450,402,932th

• Power without property. Grove, Meisenheim a Glan 1967 DNB 456,078,312th