Page 139 - Culture Society and the Media

CULTURE, SOCIETY AND THE MEDIA 129
Managerialists see this shift in the locus of corporate control as laying the
basis for a new kind of advanced industrial order which Berle dubbed ‘People’s
Capitalism’ (Berle, 1960). According to this argument the fact that most
managers own few, if any, shares in the enterprises they run separates them not
only from the capitalist class but from the underlying aims and interests of that
class. Berle and Means, for example, were adamant that the ‘managerial
revolution’ raised ‘for re-examintion the whole question of the motive force back
[sic] of industry, and the ends to which the modern corporation can or will be
run’ (Berle and Means, 1968, p. 9). They were convinced that as managers were
progressively released from the demands of shareholders they would develop
new aims and motivations. In particular, they suggested that profit maximization
would cease to be the major driving force behind industrial enterprise and that as
a result corporations would become less exploitative and more socially
responsible, more ‘soulful’ to use a contemporary term.
Berle and Means’s general thesis gained enormously in credibility from being
backed by detailed empirical evidence derived from their research into patterns of
ownership and control in all 200 of the top American corporations. The results of
this study are still frequently quoted today, and their approach has been widely
adopted by subsequent commentators. However, a closer look at their work
reveals several major problems.
Critics have attacked the managerialist argument for underestimating
the continuing power of capital ownership and for failing to take adequate
account of the structural constraints on corporate behaviour. Berle and Means
regarded 20 per cent as the minimum holding that an owner needed to enforce
his control. Consequently, if the largest identifiable holding of voting shares fell
short of this, they defined the corporation as management controlled. Using this
criterion, they were able to classify two-thirds of their total sample as under
management control. However, there are problems with this impressive-looking
finding. Firstly, the fact that they were unable to obtain reliable information on a
number of companies means, as they point out, that their ‘classification is
attended by a large measure of error’ (Berle and Means, 1968, p. 84). In fact, as
Zeitlin has shown (1974, p. 1081–2) their data only allowed them to classify 22
per cent of their total sample and 3.8 per cent of the leading industrial
corporations as definitely under management control. In the absence of reliable
data either way, they simply ‘presumed’ that the rest were also manager-
controlled. However, this is a dubious assumption for several reasons. In the first
place, the true extent of proprietal holdings is often disguised through the use of
‘nominees’ (usually banks) who hold shares on behalf of owners whose identity
they are not required to declare. Prior to the take-over by Thorn of EMI, for
example, both of EMI’s two largest shareholders were controlled by nominees;
Guaranty Nominees with 6 per cent and Bank of England Nominees with 4.6 per
cent. But even where the identity of all the major shareholders is known, Berle
and Means’s method still leads them to underestimate the degree of potential
owner control. According to the last shareholders’ list, for example, the largest