Managerial Capitalism

Abstract

As private enterprise industrial economies evolve, the proponents of the thesis of managerial capitalism argue that changes occur in the technical conditions, and scale, of production of corporations; in the structure of the ownership of their equity, and of the product markets in which they operate; and in their internal governance. The increasingly complex technological and scientific nature of industrial production requires specialist technical management expertise, and management responsibility is delegated to individuals who possess it by an increasingly absentee ownership interest. The associated increase in the scale and capital intensity of production is reflected both in the growth of oligopolistic market structures and, as external funding increases, by an ever more dispersed pattern of share ownership. Thus, the fusion between management and ownership is broken. Those responsible for exercising management responsibility come to constitute a skilled, inside, professional salaried group, essentially propertyless in relation to their own corporations, and hence separate in function and identity from the tens of thousands of shareholders who are its legal proprietors. These share owners, in turn, form an increasingly disparate, unorganized, and uninterested group of principals, unwilling or unable to impose their own self-interested contractual conditions of employment on their manager-agents. Managerial behaviour is therefore discretionary behaviour very weakly constrained by shareholder-owner interests on the one hand, or by a competitive market environment on the other. As a result, corporate behaviour changes, and with it so does the nature of capitalism (Veblen 1924; Berle and Means 1932; Berle 1955, 1960; Dahrendorf 1959; Marris 1964; Williamson 1964; Nichols 1969).