seems to have appeared for the first time in a review of this book by Burnham, though the latter did not himself employ it, preferring the term ‘managerial society’. See H.S. Person, ‘Capitalism, Socialism and Managerialism’, Southern Economic Journal, vol. 8, no. 2, 1941, pp. 238–43.15 15. Note that Orwell was here reporting an idea that he did not share. See George Orwell, ‘Second Thoughts on James Burnham’ (1946), in The Complete Works of George Orwell, vol. 18 (London: Secker & Warburg, 1986), pp. 268–84 (p. 269). Drawing on Rizzi’s La Bureaucratisation du monde (1939), Burnham reinterprets the separation of ownership and control announced by Berle and Means as a split between two modes of control: managers have control in one sense, in that they concentrate the functions of leadership – what he calls ‘control over access’ – but shareholders always have control in a second sense, in that they carve out for themselves the lion’s share in the allocation of profits – ‘control over distribution’. But such a situation can, in his view, persist: ‘control over access is decisive, and, when consolidated, will carry control over preferential treatment in distribution with it: that is, will shift ownership unambiguously to the new controlling, a new dominant, class’ (Burnham, The Managerial Revolution, p. 59). In his view, this process is already well underway: it is transnational and trans-regime: Stalinist bureaucracy, fascist dirigisme and New Deal interventionism represent, in his view, three versions of one and the same phenomenon.
16 16. Berle and Means, The Modern Corporation and Private Property, p. 8.
17 17. The rich, ‘in spite of their natural selfishness and rapacity […], though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, […] divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society […]’ (Adam Smith, The Theory of Moral Sentiments (Metalibri Digital Editions, 2005), p. 165 [available online at https://www.ibiblio.org/ml/libri/s/SmithA_MoralSentiments_p.pdf]).
18 18. Berle and Means, The Modern Corporation and Private Property, p. 9.
19 19. Ibid., p. 304.
20 20. Ibid.
21 21. Ibid., p. 9.
22 22. ‘The directors of such companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company’ (Smith, The Wealth of Nations, pp. 574–5). See also Berle and Means, The Modern Corporation and Private Property, p. 115.
23 23. Schumpeter, Capitalism, Socialism and Democracy, p. 157, n. 1.
24 24. Berle and Means, The Modern Corporation and Private Property, p. 115.
25 25. Henry G. Manne, ‘Current Views on the Modern Corporation’, University of Detroit Law Journal, vol. 38, 1961, pp. 559–88 (p. 560).
26 26. Berle and Means, The Modern Corporation and Private Property, p. 302.
27 27. ‘The explosion of the atom of property destroys the basis of the old assumption that the quest for profits will spur the owner of industrial property to its effective use. It consequently challenges the fundamental economic principle of individual initiative in industrial enterprise. It raises for reexamination the question of the motive force […], and the ends for which the modern corporation can be or will be run’ (Berle and Means, The Modern Corporation and Private Property, p. 9).This does not merely undermine the hypothesis of the maximization of profit as a realistic description of entrepreneurial behaviour, but denies the institutional basis of the traditional profit motive (see Edward S. Mason, ‘The Apologetics of “Managerialism”‘, The Journal of Business, vol. 31, no. 1, January 1958, pp. 1–11 [p. 6]).
28 28. Richard Sedric Fox Eells, The Government of Corporations (Glencoe, IL: Free Press of Glencoe, 1962), p. 16.
6 ETHICAL MANAGERIALISM
There is no theory of the firm that satisfactorily justifies the large modern corporation. Efforts are made to elevate the idea of social responsibility (or, synonymously, the corporate conscience or good citizenship) to the status of a theory of the firm.
Wilbur Hugh Ferry1
[…] they have not, like the medieval corporations, as yet created a corporate conscience in lieu of the individual responsibility which, by dint of their very organization, they have contrived to get rid of.
Karl Marx2
In the modern period, noted Charles Fourier, a new type of discourse had taken the place of morality and its sermons. The moralists did not realize soon enough that ‘Political Economy [has] invaded the whole field of charlatanerie […], the moralists have fallen into nothingness, and have been pitilessly enrolled into the class of novelists. Their sect died with the eighteenth century; it died politically’.3 As for the economists, they had quickly become too strong to need allies, and had ‘scorned any path of rapprochement and maintained all the more that what was needed was great, no, very great wealth, with a huge trade and huge commerce’.4
But, he added, ‘the fall of the moralists harbingered the fall of their rivals. We can apply to those literary sects the words of Danton who, on the scaffold, already tied down with a strap, said to the executioner: Keep the other for Robespierre; he will soon be following me. So moralists can tell their hangman, and the public opinion that is sacrificing them: Keep the other belt for the economists; they will soon be following us’.5
What Fourier did not foresee, however, was that this predicted death would be followed by a singular rebirth. In the twentieth century, an unprecedented crisis undermined Adam Smith’s doctrines. People were already working behind the scenes to update the theory, but the initial response was to exhume ancient idols. The economy succumbed in turn, and its fallen rival, morality, made a new entrance in the new guise of an ethical managerialism that presented itself in the 1950s as the grand solution to the problem of the legitimacy of managerial power.
In the vision of the world put forward by the old industrialist paternalism, the manager-owner reigned over his business as his own ‘thing’. He was still viewed in the nineteenth century as a descendant of line of the old ‘master, the dominus, that is to say, the owner of the workers he employs’.6 He could always retort to those who questioned his power, ‘Here, I am the one who commands because I am at home, and this belongs to me’. This was the basis for an authority to which the managers of large modern companies can no longer lay claim.
The separation of ownership and control has not only shattered the old managerial justification for authority,7 but has also weakened the demands of the shareholders (who are now merely passive owners) that the ‘corporation should be operated in their sole interest’.8 The appearance of huge, ‘quasi-public’ companies, whose decisions have an impact on everyone’s lives, have ‘placed the community in a position to demand that the modern corporation serve not only the owners […] but all society’.9
So
