On the Origins of The Modern Corporation and Private Property

The Modern Corporation and Private Property (MCPP) by Adolf A. Berle Jr. and Gardiner Means, published in 1932, is undisputedly the most influential work ever written in the field of corporate governance. In a nutshell, Berle and Means argued that corporate control had been usurped by a new class of managers, the result of which included (1) shareholder loss of control (a basic property right), (2) questionable corporate objectives and behavior, and (3) the potential breakdown of the market mechanism. In this paper, I examine the origins of MCPP, paying particular attention to the authors’ underlying motives. I argue that shareholder primacy was not the principal motive. Rather, the principal underlying motive was the well-documented growing gap between potential gross domestic product (GDP) and actual GDP in the 1920s, a problem they, like myriad other period writers, attributed to managerial behavior—in short, a breakdown of governance. In this regard, MCPP should be seen as analogous in scope to the period writings of Thorstein Veblen, Paul Douglas, Henry Ford, Edward Filene, Rexford Tugwell, and many others in the 1920s