Tamar Frankel


In The Modern Corporation and Private Property, Adolf A. Berle and Gardiner Means wrote about the separation of ownership from control in corporations. They noted that the interests of the controlling directors and managers can diverge from those of the shareholder owners of the firm. . . . There are those who consider such a decoupling beneficial. Others express the same concern that Berle and Means have expressed. And depending on what one focuses on in viewing the pluses and minuses of these separations, one could reach different conclusions. I reach a number of conclusions. First, the separation of ownership from control creates the problems that Berle, Means, and Laski noted, regardless of how sophisticated, complex, or enticing the separation is. That is, those who control but do not own may control corporations inefficiently and sometimes dishonestly. Second, there is a need to maximize the benefits from decoupling while minimizing the potential losses by those who do not have their “skin” in the losses. Above all, the aspects of decoupling that pose a threat to the financial system must be controlled by private and public regulation. The time has come to raise the scholarly and public awareness about these issues.