This is an excellent, timely book on modern corporate structure and its philosophical and legal underpinnings. It was written over 65 years ago, but it is as relevant now as it was then. The large scale government chartered collectivist enterprises we know as corporations were well developed by the early 20th century. Over 80 years ago, most of the economy was controlled by these collectives, and most of those collectives were controlled by their management and not their owners. In fact, some of these enterprises might have hundreds of thousands of owners.
Berle and Means dissect what this change means in terms of Adam Smith's theories and more modern legal theories. What does it mean when one owns property that is controlled by others. What checks are there on the authority of corporate officers in their fiduciary roles? Who is the beneficiary of their trust? These questions are as relevant today as they were when this book was published.
The world of the unbridled modern corporation has its defenders, most of the sort that George Orwell called bully worshipers, that is, those who worship power, the more, the better. Unfortunately, as we seem to discover every generation or two, these structures have serious shortcomings when it comes to providing the goods and services that we expect. Today, as when the book was published, we are in a period of reassessment. The private sector has failed horribly, showing itself unable to manage the nation's finances, produce automobiles or deliver health care.
When times are good, people forget that corporations are just government chartered collectives, and what the government creates, it can monitor, modify and control. Berle and Means point this out clearly as they outline the rise of modern corporate structure. It was not created in one step, nor did it evolve naturally. Berle and Means then turn to the remedies that might restore the nation's faith in its private sector. In fact, one section of the book underlies much of modern security law, including such innovations as bans on insider trading, the creation of the SEC, reporting requirements, and restraints on the assignment of earnings and on issuing shares.
Berle and Means, and those who followed their advice in the New Deal did their job well. For decades, the markets ran smoothly, and when things are running smoothly, people forget the lessons learned. The engine of our economy needs a tune up, perhaps even a rebuild. This makes it a good time to learn something about how the engine works, and how it came to work that way.