Adolf Augustus Berle

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Adolf Augustus 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 American economics.

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Life

After his bachelor's (1913) and master's (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 for the Negotiation of Peace with Germany (1918). From 1927 to 1964 he was a professor of corporate law ( corporation law ) at Columbia Law School. From 1933 he began a career in civil service. He was a member of the so-called brain trust in the early years of US President Franklin D. Roosevelt (a group of professors who advised the President), advisor on the Good Neighbor Policy , advisor in the Reconstruction Finance Corporation (1933–1938) , Deputy Secretary of State (1938–1944), Ambassador to Brazil (1945–1946), Chairman of the Task Force on Latin America (1961), Advisor to the Secretary of State (1961–1962), US delegate to various Pan-American conferences and President of the International Conference on Civil Aviation . As State Secretary in the Foreign Ministry, he worked closely with John Edgar Hoover to prepare the reorganization of the FBI in 1940 by establishing the Special Intelligence Service (SIS), the foreign intelligence department, into a secret service that operates worldwide. What was remarkable about this was that this decision was made on the instructions of President Franklin Delano Roosevelt, with the deliberate exclusion of the constitutional bodies that were actually required to be involved.

Works and themes

No American area of ​​law has been so dominated by a single work as US corporate law by The Modern Corporation and Private Property (1932). Berle and his co-author, the economist Gardiner C. Means , presented an analysis of the American economy and showed that the means of production were mainly in the hands of the 200 largest companies. They also showed that this concentration was increasing and that there was a clear separation of ownership and control in companies. Up until now it had been assumed that every owner would have the opportunity to use his property to his / her advantage. Berle and Means contradicted this assumption and showed a new picture of private companies.

In two later works ( The 20th Century Capitalist Revolution (Eng: 1954) - The Capitalist Revolution of the XXth Century (Eng: 1958); and Power without Property (Eng: 1959) - Power without Property (Ger: 1967)) worked Berle propose that the management of large companies - together with the fact that they have also escaped the control of their shareholders - have achieved enough power to free themselves from the market and its competition. The old theories of the market and competition are obsolete with the accumulation of great power in the hands of management.

The Modern Corporation and Private Property

Berle and Means argued that corporations ( corporations ) become the dominant form of organization of modern society. The background to this is the emergence of the modern large company and, as a result, the development of the multi-product company. According to Berle and Means, the distribution of property among many shareholders leads to a loss of control over the newly created class of managers. The actual power of disposal over the company lies in managerial capitalism, while the marginalized supervisory bodies and shareholders can in extreme cases (only) passively approve management decisions. The agency relationship between management and shareholders described in the book already outlines key areas of US corporate governance . Berle / Means develop solutions to the so-called principal-agent problem : The company managers (agents) do not always pursue the same interests in the management of the company as the company owners (principals). One result of the investigation was the insight that economic pressure is driving the further development of corporation and capital market law.

The capitalist revolution of the XX. Century

Corporations today have an economic and social responsibility. You have come into this position of power and responsibility involuntarily. The capitalism is thus not a way of life ( way of life ), but a method for obtaining economic and social results . The general public benefits from American capitalism through mass production and distribution. Louis M. Hacker ( Columbia University ) speaks here of the “triumph of American capitalism”, since there is no such thing as “poverty” as there is elsewhere. Berle cites the October Revolution of 1917 as an example : According to this, tsarist Russia still lived backward, while Western Europe and America benefited from the technical and economic advances (of the 19th century). In his opinion, these areas were now seeking the results and benefits of the industrial revolution. With this, Berle is at odds with Karl Marx , according to which capitalism must first be overcome.

Yet he finds parallels between socialism and corporations. For example, an investor in a corporation gives the management all the powers to work, produce and develop with the capital. However, she (the person) has no control over the product. In return, she has a limited right to a share of the earnings ( dividend ). But there is no longer any own (creative and productive) work (such as with the farmer on his own ranch). In socialism, the owner and owner of the production goods is the state, an authority or society. The citizen receives a wage or a pension. The planning, development and production are in the hands of the state. However, the individual receives a share of the product (wages).

The shareholders transfer the management (inevitably) to the board of directors. (“One million shareholders could not run a corporation at the same time.”) There is a split in ownership: the shareholders receive, and the management produces. But the management now has power.

  • towards employees (recruitment, dismissal, wages, working conditions)
  • Supply of markets (e.g. electricity in rural areas)
  • Development of cities and areas (electricity in the countryside, factory construction)
  • they determine the pace of development

One inevitably comes to the question of whether one can restrict power, e.g. B. by external factors such as public opinion.

According to a 1953 study of the sources and uses of National City Bank's capital, approximately $ 150 billion in capital investments accumulated between 1946 and 1953. These are divided as follows:

  • 64% from internal sources (revenue, profits, dividend withheld)
  • 18% from banks (current debt)
  • 12% of bonds, promissory notes (towards insurance companies and syndicates)
  • 6% from shares (however almost half of which are preferred shares)

So there are no real barriers to corporation power. You practically do not need to be valued on the capital market. Previously this examination was done by banks and investment companies, today directors and managers are only responsible to their consciences. (In the last chapter, however, Berle says restrictively that the state has control and control options. If the state announces that it will put electricity in the country, then the companies also move to forestall competition from the state.) Nevertheless, this state of affairs has the pace of progress even stimulated. Banks tend to be conservative in their assessment, while managers know their company and tend to promote research and development.

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

  • horizontally through competition within the industry
  • vertically through competition with other goods (example: high coal prices drive oil consumption, high rail prices drive transport on the road)

Power without property

The managers are responsible to four groups

  • the community your company buys from
  • the community to which their company sells
  • the employees of the company
  • and the security owners

This means that they have a larger electorate than many a politician. Today's businessman is offered more power than his social position justifies. (As an example, he cites the financier who is sent for a brain operation. This is of course great nonsense and should be done by a surgeon. However, when it comes to whether trade with China is peace-building, the manager can decide, although this decision is no less important.)

Both de facto and de jure is meant by property such thing that you can possess; that is, restricted to and controlled by an individual or individuals, the owner. But the growth of the social system has changed the image of the owner.

As long as the business and society remained small, shareholders largely determined what management should do. As society grows, it becomes apparent that the legal person known as society appears as the owner of the property . The property, originally the hallmark of the owner, has now passed to the managers. This means that property is no longer the relationship between man and thing, but man and man . The subordinate to another person has actual control of the matter. It is now about power without property ! (As an example, he cites a (possibly made-up) anecdote. According to this, the night watchman from General Electrics kicked the president of the company out for not knowing him. The night watchman was the owner of the company that evening , and the president was only an agent one impersonal society that is the (legal) owner . The president is therefore only a private person with the power to give orders.)

In the 1960s there was broad consensus among economists that the managers of the large stock corporations did not pursue a strategy of maximizing their own profits, but that their primary goal was growth. The separation of ownership and control in the large stock corporations, however, shielded the managers from the influence of the owners and gave them extensive autonomy.

In 1960, 88% of the share capital in the United States was still 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 in strategy has taken place. Maximizing profit is now the dominant goal of managers.

The following factors can limit and control economic power:

  • Unions
  • Dependency on competitors, suppliers, bulk buyers, ...
  • Loss of capital (= loss of power)
  • Political Intervention
  • "Public Approval", Prestige

Public consensus is the product of a set of thoughts and experiences, public opinion. This can build up so much pressure that politicians intervene. While this public consensus has not yet been enshrined, managers in every industry are well aware of it. Berle suspects the time will come when such guidelines are needed and will be established. In many areas, actions and results would be technically permitted under the rules of the law, but not permitted under the requirements and principles of public consensus. According to Berle, this reflects the reality of economic democracy in the United States.

Conclusion and criticism

Despite scientists like Berle and Means, the belief that ultimately the owners were in charge has held up to this day. However, one of the fundamental characteristics of large companies in the 21st century is a management system that grants power for self-enrichment.

The Berle and Means model is therefore still up-to-date in many respects. Nevertheless, there are points of criticism. So the limitation of (economic) power by competing companies and products is no longer given. With rising petrol prices, alternative energies should be available cheaply long ago (vertical limitation). Even today, big capital is in the hands of only a few companies, banks or investment funds (horizontal limitation). These are slowly developing into a new power factor. The best-known example was the attempt by Deutsche Börse AG to take over the London Stock Exchange . This failed after the intervention of the Atticus and ITC mutual funds. The managers are no longer solely responsible to their conscience.

Memberships

In 1944 Berle was elected to the American Academy of Arts and Sciences . Since 1965 he was an elected member of the American Philosophical Society .

bibliography

  • The Modern Corporation and Private Property. Commerce Clearing house, New York 1932, OCLC 422091748 . (with Gardiner Means)
  • The 20th Century Capitalist Revolution. Harcourt, Brace, New York 1954, OCLC 788593256
    • The capitalist revolution of the 20th century. Hain, Meisenheim a. Glan 1958, DNB 450402932 .
  • Power without property. Harcourt, Brace & World, New York 1959, OCLC 582368
    • Power without property. Hain, Meisenheim a. Glan 1967, DNB 456078312 .
  • Latin America: Diplomacy and Reality. Harper & Row, New York et al. 1962. (1981, ISBN 0-313-22970-8 )

Individual evidence

  1. ↑ Tim Weiner : FBI, The True Story of a Legendary Organization. from the American by Christa Prummer-Lehmair, Sonja Schuhmacher and Rita Seuss. S. Fischer, Frankfurt am Main 2012, ISBN 978-3-10-091071-4 , pp. 138, 139.
  2. ^ Henry G. Manne: Intellectual Styles and the Evolution of American Corporation Law. In: Gerard Radnitzky , Peter Bernholz (Ed.): Economic Imperialism. The Economic Approach Applied Outside the Field of Economics. Paragon House Publishers, New York 1987, ISBN 0-943852-11-0 , p. 223.
  3. ^ Digitized online at Archive.org .
  4. ↑ Report on the failed takeover of the London Stock Exchange by Deutsche Börse from March 10, 2005 on: ZEIT Online.
  5. ^ Members of the American Academy. Listed by election year, 1900-1949 ( PDF ). Retrieved October 8, 2015
  6. ↑ Member History: Adolf A. Berle. American Philosophical Society, accessed April 30, 2018 .

Web links

personal data
SURNAME Berle, Adolf Augustus
BRIEF DESCRIPTION American lawyer
DATE OF BIRTH January 27, 1895
PLACE OF BIRTH Boston , Massachusetts
DATE OF DEATH 17th February 1971
Place of death New York City , New York