The Institutional Framework

Abstract

‘Managerial’ capitalism is a name for the economic system of North America and Western Europe in the mid-twentieth century, a system in which production is concentrated in the hands of large joint-stock companies. In many sectors of economic activity the classical entrepreneur has virtually disappeared. His rôle was essentially active and unitary; once dismembered, no device of collective abstraction could put him together again. As a result (so a substantial body of writers have suggested),⁽²⁾ entrepreneurship in the modern corporation has been taken over by transcendent management, whose functions differ in kind from those of the traditional subordinate or ‘mere manager’. These people, it is argued, can wield considerable power without necessarily holding equity, sharing profits or carrying risks.

‘Two forms of property appear, one above the other, related but not the same. At the bottom is the physical property itself, still immobile, still there, still demanding the service of human beings, managers and operators. Related to this is a set of tokens, passing from hand to hand, liquid to a degree, requiring little or no human attention, which attain an actual value in exchange or market price only in part dependent on the underlying property…. A first-rate manager would not increase the values of the properties were they to be sold; but he will increase the value of tokens representing that property. A poor management will have the opposite result.’

— Berle and Means⁽¹⁾