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Firm, Property and Governance: From Berle and Means to the Agency Theory, and Beyond

Author

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  • Weinstein Olivier

    (University Paris 13)

Abstract
Over the last thirty years, the shareholder conception of corporate governance has established itself as the foundation of the power structure and management principles of the corporation. It is based on a specific theorization of the firm: agency theory. Our aim is to explain the full significance of this theorization, by considering the context in which it was developed and the project – of a fundamentally political nature – that it conveys. For that purpose, we return to the questions raised during the first half of the twentieth century, in the seminal book of Berle and Means and in subsequent works by Berle; questions of a much broader scope that the relationship between shareholders and managers. We will show that agency theory can be considered a response to the most important ideas advanced by Berle and Means, and then by Berle (and others), after the New Deal and the Second World War. Comparison of these two themes of reflection leads us to identify two theorizations, and two radically different conceptions of the firm and the corporation. To address these issues, we start by considering the questions raised in the early twentieth century about the nature of the corporation and the status of managers; and how, in response to these questions, Berle constructed a certain conceptualization of the corporation and of managerial capitalism; we shall then revisit the contract-based approach of Jensen and Meckling, to assess the theoretical and ideological content and show how it was actually strongly opposed to Berle’s vision. Lastly, by way of conclusion, we shall endeavor to show how the opposition between these two theorizations should be seen, above all, as an opposition between two theories that are both “performative” rather than positive, and that the apparent success of agency theory and the dominance of shareholder primacy in corporate governance can only be understood in an institutional and political perspective.

Suggested Citation

  • Weinstein Olivier, 2012. "Firm, Property and Governance: From Berle and Means to the Agency Theory, and Beyond," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 2(2), pages 1-57, June.
    • Handle: RePEc:bpj:aelcon:v:2:y:2012:i:2:n:2
    DOI: 10.1515/2152-2820.1061
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    References listed on IDEAS

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    2. Houda Dziri & Anis Jarboui, 2019. "The extent of social contribution of venture capital organisationsto funded financed companies," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 9(10), pages 293-304, October.
    3. Styhre Alexander, 2018. "The Making of the Shareholder Primacy Governance Model: Price Theory, the Law and Economics School, and Corporate Law Retrenchment Advocacy," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 8(3), pages 1-31, December.
    4. Butzbach Olivier & von Mettenheim Kurt E., 2015. "Alternative Banking and Theory," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 5(2), pages 105-171, July.
    5. Veldman, Jeroen, 2018. "Inequality, Inc," MPRA Paper 86644, University Library of Munich, Germany.
    6. Weinstein Olivier, 2013. "The Shareholder Model of the Corporation, Between Mythology and Reality," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 3(1), pages 43-60, January.
    7. Aaron Bruhn & Anthony Asher, 2021. "The primacy of ethics in the provision of financial advice," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(2), pages 3305-3327, June.
    8. Catherine Bodet & Thomas Lamarche, 2013. "La RSE contribue-t-elle au développement durable ?," Working Papers halshs-00912728, HAL.
    9. Alice Klettner & Thomas Clarke & Martijn Boersma, 2014. "The Governance of Corporate Sustainability: Empirical Insights into the Development, Leadership and Implementation of Responsible Business Strategy," Journal of Business Ethics, Springer, vol. 122(1), pages 145-165, June.
    10. Clarke, Thomas & Jarvis, Walter & Gholamshahi, Soheyla, 2019. "The impact of corporate governance on compounding inequality: Maximising shareholder value and inflating executive pay," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 63(C).
    11. Dziri Houda & Jarboui Anis, 2017. "The venture capitalist’s cognitive approach: Validation through the Tunisian context," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1323371-132, January.
    12. Jonnergård Karin & Larsson-Olaison Ulf, 2018. "Doxa of Shareholders and Owners: On the Threshold of Financialization," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 8(3), pages 1-18, December.
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