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Abstract

In <em>The Modern Corporation and Private Property</em>, Adolf Berle and Gardiner Means would use AT&T as a prime example of what they saw as a dangerous new trend, the replacement of ownership-based capitalism with giant corporations controlled by a small group of propertyless managers. Indeed, AT&T became Berle and Means’ favorite example. . . . As we shall see, however, the claim that AT&T was a leading example of the separation of ownership from management is incomplete. More importantly, the common interpretation of Berle and Means’ work is mistaken, placing the emphasis incorrectly on the number of shareholders and reading modern concerns over conflict between principals (owners) and agents (managers) into the past. . . . Berle and Means brought popular attention to an issue of power in the modern corporation that continues to be debated until the present. Yet, over time, their insights were lost in economic theories that placed almost exclusive emphasis on efficiency rather than power. The results were, by the 1970s, corporate policies that sought to correct the problem of principal-agent conflict in ways that greatly exacerbated the problem that Berle and Means had warned was far larger—the ability of insiders to control corporate property and use it in ways detached from issues of social responsibility.