The Transfer of Control in Large Corporations: 1905-1919
In 1905, Wall Street Journal editor Sereno S. Pratt examined the control of large American corporations and found that, despite its republican form, "in practical operation, . . . the stock company is subject to autocratic or oligarchical control. The stockholders do not vote-they send proxies that are held by the powers that be.... It is not difficult for a small group of financiers to dominate properties worth billions of dollars, belonging to thousands of investors, who have really no voice in their management" [Pratt 1905, pp. 6704-5]. Twenty-five years later, A. A. Berle, Jr. and G. C. Means made a similar argument, but suggested that power "ultimately (lay) in the hands of management itself, a management capable of perpetuating its own position" [Berle and Means 1932, p. 124]. While both Pratt and Berle-Means believed that the inability of owners to effectively exercise ownership rights led to their usurpation by other, better organized forces, they disagreed as to who actually seized control. Berle and Means assumed that managers took control from shareholders. On the other hand, Pratt concluded that shareholders had long lost out to