The great pyramids of America: A revised history of U.S. business groups, corporate ownership, and regulation, 1926–1950 (original) (raw)
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2013
(Toronto) the 10th CSEF-IGIER Symposium on Economics and Institutions (Capri) and the World Finance Conference (Venice) for helpful comments and suggestions. The views expressed here are the authors, and do not necessarily reflect those of the Bank of Canada, the Bank of Israel, or the National Bureau of Economic NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
CEPR Discussion Paper Series, 2020
Large business enterprises, from the railroad barons of nineteenth century America to Amazon and Google today, are often perceived as important for economic performance and, at the same time, as potential abusers of their political and economic power. In this study, we compare the experiences of four countries that implemented policies to curb the influence of one type of large corporate entities â?? pyramidal business groups: The US in the 1930s; Japan during the American occupation (1945-1952); Korea following the Asian crisis (late 1990s); and Israel in the last decade (2010-2018). Novel regulatory measures, applied consistently in the US and Japan, where the extreme political circumstances were very favorable to economic reform, led to the demise of pyramidal business groups in these countries. Israel, where the reforms did not follow a severe crisis, also used specifically-designed regulatory tools over a decade-long period, resulting in a significant decline in the number and ...
Business groups and the natural state
2012
Recent revisionist accounts of corporate governance in both business history and finance are challenging the tradition narrative, associated with Berle and Means (1932) and Alfred Chandler (1977), in which the American model of diffuse ownership and coherent diversification is both an inevitable outcome of economic development and perhaps a normative standard for the world to follow. This essay is an attempt to rethink that narrative in light of the continued significance of the pyramidal business group as a governance structure around the world. Drawing on the North, Wallis, and Weingast (2009) theory of the state, I argue that the evolution of corporate governance can be understood only in institutional terms and that institutional development is driven by the coalitional structure of the polity. This is true as much in open-access orders like the U. S. as in the natural states that rule most of the world. In the end, I endorse the view that the much-discussed and oft-misunderstood exceptionalism of the U. S. in corporate governance has its roots of the differential effect on the U. S. of the collapse of globalization during the middle years of the twentieth century.
Interlocking Directorates in Large American Corporations, 1896-1964
Business History Review, 1971
GRADUATE STUDENT IN ECONOMICS FLORIDA STATE UNIVERSITY Interlocking Directorates in Large American Corporations, 1896-1964' (An examination of interlocking directorates in major American businesses since 1896 indicates that the incidence of interlocking has declined considerably in this century. Industrial America experienced two vast and fundamental changes between 1896 and 1905. First, large corporations, stigmatized as "trusts," became the predominant business form. The 100 largest corporations not only increased their average size four times during this ten-year period, but in addition, gained control of 40 per cent of the nation's industrial capital.' Most of these organizations were new; many were less than ten years old. Second, certain fundamental property rights disintegrated. Corporate shareholders found it nearly impossible to exercise the ownership rights of their stock. More than one stockholder, when questioning some corporate proposal, was told simply to "vote for it first and discuss it afterwards." 2 These circumstancesnew, huge, apparently uncontrollable organizationsnaturally created concern. Depending upon the enumerator, 300 to 700 corporations were created, promoted, and Business History Review, Vol. XLV, No. 3 (Autumn, 1971). Copyright a The President and Fellows of Harvard College. *Research for this paper was conducted at the University of Oregon; computer time was provided by the Department of Economics there. Responsibilities were divided as follows: Bunting sought data on industrial, railroad, banking, and investment organizations; Barbour collected information on utilities. Jerry Paul Simpson and Professor Robert E. Smith offered many comments. An earlier version of this paper was presented at the 1970 Western Economic Association meetings. Carol Choat typed the manuscript. 1 David Bunting, "The Rise of Large American Corporations: 1896-1905," (Ph.D. dissertation, University of Oregon, in preparation), Chapter II. SAlexander D. Noyes, Forty Years of American Finance (New York, 1909), 344. floated after 1896.8 Many of these quickly disappeared into new promotions; some were frauds; most enjoyed indifferent success; a few returned handsome dividends.4 Nearly all were promoted as devices to gain large dividends through the elimination of competition, the consolidation of inefficient organizations, and the exercise of large-scale economies." Yet these supposed benefits failed to convince many citizens. Instead, these promotions appeared to be merely financial machinations to replace local enterprises with national consolidations. Many corporate promoters were unscrupulous megalomaniacs, bent on creating financial empires. Since social and legal constraints were lacking, megalomania prevailed and "empires" were created. These in turn attracted other similarly inclined individuals who attempted to construct their own giant enterprises or capture those already in existence. Titanic financial battles ensued. Well known examples include the Harriman-Hill fight over the Chicago, Burlington & Quincy, the Standard Oil-Lawson-Heinze dispute in copper, and Morgan's termination of C. W. Morse's chain banking activities. Out of this chaos arose "communities of interest" wherein various properties were shared. Thus, Hill and Harriman compromised with Northern Securities, the Pennsylvania Railroad purchased stock in competing lines, Standard Oil interests collaborated with the National City Bank, and J. P. Morgan constructed voting trusts. Because this activity was limited to a few principals, the public, lacking power, was excluded. Control of much of American finance and industry passed into the hands of a few individuals. Over the years, the magnitude of this control has been studied and restudied with the common conclusion that financial oligarchies controlled the economy then and still exercise that control today. In 1905, Seno Pratt, an editor of the Wall Street Journal, identified "the seventy-six men who make up the 'Business Senate' of the United Stateswhat they controltheir cliques and parties."6 Pratt further stated, "In practical operation. .. the stock company 8 Seven hundred ninety-three trusts (453 industrial and 340 local or "natural") are listed in the
The Social and Political Origins of the American Business Corporation, 1787-1861
2018
Why did the business corporation become so common in 19 century America? I argue against prevailing explanations for corporate proliferation that point primarily to the power of capitalist elites or to selection by market forces. Instead, I explain corporate development by demonstrating the importance of democratization to institutional change. Using a combination of historiographical and quantitative methods, I argue that the American business corporation was “democratized” through increasing popular participation in politics. Furthermore, I argue that this popular engagement in corporate law was not narrowly “economic” in nature, but was undertaken in an effort to create a more egalitarian and republican society. I pay special attention to how ideas about republican society and democratic governance interacted with the American party system to reshape corporate development. In particular, I argue that the Jacksonian Democrats played an integral role in corporate development becaus...
This paper aims to analyze the results of the research in pyramidal structures within the scope of the business groups, based on a systematic literature review. The research was conducted on two large-scale journals databases (Web of Science and Scopus), using VOSviewer, HistCite™, and Iramuteq software. The textual corpus is consisting of 65 articles and 137 authors and co-authors. Bae et al. (2002) and Almeida and Wolfenzon (2006) are the most influential for the research fields. We infer as a conceptual framework that searches in pyramidal structures are contained in the field of business groups since they represent a form of organization and representation of ownership and control. We identify as a theoretical gap the analysis of the political connections and the social role. Thus, the contributions are in the sense of presenting a panorama on the themes, supporting future researches.
The Small World of the American Corporate Elite, 1982-2001
Strategic Organization, 2003
This paper examines the degree of stability in the structure of the corporate elite network in the US during the 1980s and 1990s. Several studies have documented that board-toboard ties serve as a mechanism for the diffusion of corporate practices, strategies, and structures; thus, the overall structure of the network can shape the nature and rate of aggregate corporate change. But upheavals in the nature of corporate governance and nearly complete turnover in the firms and directors at the core of the network since 1980 prompt a reassessment of the network's topography. We find that the aggregate connectivity of the network is remarkably stable and appears to be an intrinsic property of the interlock network, resilient to major changes in corporate governance. After a brief review of elite studies in the US, we take advantage of the recent advances in the theoretical and methodological tools for analyzing network structures to examine the network properties of the directors and companies in 1982, 1990, and 1999. We use concepts from smallworld analysis to explain our finding that the structure of the corporate elite is resilient to macro and micro changes affecting corporate governance.
2005
Arguments for eliminating the double taxation of dividends apply only to dividends paid by corporations to individuals. The double (and multiple) taxation of dividends paid by one firm to another -intercorporate dividends -was explicitly included in the 1930s as part of a package of tax and other policies aimed at eliminating United States pyramidal business groups. These structures remain the predominant form of corporate organization outside the United States. The first Roosevelt administration associated them with corporate governance problems, corporate tax avoidance, market power, and an objectionable concentration of economic power; and undertook a sustained program that rapidly broke up large American pyramidal groups.
Business Organization in the Long Run: Private Limited Companies Rule
A long tradition in the economics, corporate law, and corporate finance literatures presumes the general superiority of the corporation as a form of business organization. A more recent tradition claims that countries with Anglo-American legal systems afford investors greater protection than countries with civil-law systems. This article challenges both claims. We focus on the introduction of the private limited-liability company (the PLLC) in France, Germany, the United Kingdom, and the United States in the late nineteenth and twentieth centuries. The PLLC combined the advantages of legal personhood and joint stock with flexible internal governance rules. It allowed business people to avoid the threat of untimely dissolution inherent in partnerships without taking on the full danger of minority oppression that came with the corporation. The PLLC was successfully introduced first in Germany, a code country, and last in the US, a common-law country whose courts had effectively killed earlier attempts to enact the form. Using data on the number of firms organized under various enterprise forms, we show that the PLLC became the form of choice for small- and medium-size enterprises wherever it was introduced, even in countries where incorporation was cheap and easy and the regulatory burden on corporations was light.