Leslie Hannah

The 'Divorce' of ownership from control from 1900 onwards: Re-calibrating imagined global trends

In 1900 US business corporations were dominated by plutocratic family owners, while British and French quoted companies showed higher levels of divorce of shareholding owners from management controllers. Distinctive European ‘democratic’ corporate governance rules explain some of Europes precocity and Londons distinctive listing requirement of large ‘free floats’ was an important initial factor in manufacturing. Later in the twentieth century, the United States displaced France by further divorcing ownership from control. Business historians should direct their efforts to understanding why Britain was an early pioneer with persistent wide shareholding, why America took decades to catch up and why other countries did not build on their earlier lead (or even married ownership and control more closely). The pursuit of alternative (largely imagined) histories of national ownership differences could usefully be curtailed.

Logistics, market size, and giant plants in the early twentieth century: a global view

The businesses of developed Europe—transporting freight by a more advantageous mix of ships, trains, and horses—encountered logistic barriers to trade lower than those in the sparsely populated United States. Economically integrated, compact northwest Europe was a multinational market space larger than the United States, and, arguably, as open to interstate commerce as the contemporary American domestic market. By the early twentieth century, the First European Integration had enabled its manufacturers to build more than half the worlds giant plants—many more than in the United States—as variously required by factor endowments, consumer demand, and scale economies.

The Whig Fable of American Tobacco, 1895 1913

At the beginning of the twentieth century, US tobacco manufacturers were not forging ahead of their leading European counterparts in technology, productivity or managerial techniques. On some indicators, including per capita cigarette consumption, the USA strikingly lagged much of the rest of the world. Fiscal discrimination against cigarettes, amplified by the monopoly pricing, strategic choices, and organizational overload of the American Tobacco trust, are among the retarding factors.

New Issues in British Business History

Business history has been a thriving academic industry in Britain for the last three decades. Following some pioneering case studies of Industrial Revolution entrepreneurs by the early giants of the discipline of economic history, the postwar generation has produced a series of high quality company histories. The first of these, published in 1954, was Charles Wilsons history of the Anglo-Dutch multinational Unilever, formed by a merger of Lever Brothers and Margarine Unie in 1929. Wilsons book set the pattern for a high standard of scholarship, resting on complete freedom of access to company archives, and for publication based on scholarly independence rather than the public relations needs of the commissioning organization. If some of its terms of reference now seem dated, and its framework of analysis somewhat unscientific, then that is an indication of the incentive Wilson provided for others to do better, particularly in the use of economic theory and of comparative analysis setting firms in their industrial or international context.

A Global Corporate Census: Publicly Traded and Close Companies in 1910

In 1910 the world had almost half a million corporations, only one-hundredth of todays total. About one-fifth—with over half of corporate capital—were publicly tradable, higher portions than today. Most publicly quoted corporations traded in Europe and the British Empire, but most close (private) corporations operated in the US, which, until the 1940s, had more corporations per capita than anywhere else. The 83 countries surveyed here differed markedly in company numbers, corporate capital/GDP ratios, and average corporate size. Enclave economies—dominated by quoted (and often foreign-owned) companies—had the largest average sizes, while other nations had more varied mixes of large quoted corporations and close company small and medium enterprises.

J. P. Morgan in London and New York before 1914

Before 1914, London had a stock exchange that was larger and qualitatively more developed than New Yorks. Yet the London Stock Exchange has received a bad press from historians, while the New York Exchange has achieved star billing. This forensic reexamination of J. P. Morgan–a player in both markets–suggests that such a historiography is egregiously biased. Morgans higher profi ts in New York derived partly from insider deals and partly from monopolistic exactions that U.S. protectionism facilitated but that proved more problematic in the U.K.s open, competitive markets. Morgans contributions to the impressive catch-up process by the New York Exchange are more plausibly viewed as successful emulation of European securities-market precedents on routine matters than of the allegedly path-breaking “information-signaling” innovations of more Panglossian accounts.

A failed experiment: the state ownership of industry

INTRODUCTION The nineteenth century saw a few utopian socialist experiments, and Victorians uncontroversially resorted to municipal ownership in a wide range of public utilities. In the twentieth century, a remarkable series of political experiments with nationalisation has given applied economists and historians an even richer variety of material for investigation and encouraged systematic empirical investigation of the record of different systems of ownership. In the communist bloc, whole economies were transformed from semi-feudal or capitalist market economies to socialist planned economies, of many varieties. They shared the common characteristic that the material means of production were largely owned by the state and many basic allocative decisions – on consumer choice as well as allocations of investment – were made centrally. By the end of the 1980s the economic inefficiency and political bankruptcy of such socio-political systems precipitated their widespread collapse and/or extensive marketisation. Yet experience of state ownership has not been confined to the totalitarian socialist countries. Among the liberal democracies, there was a wide range of state ownership, though their powers were usually somewhat less than in Soviet central planning. There are considerable problems in measuring the size of the state-owned industry sector in different economies, not least because of the variations in national statistical definitions of these industries (Pathirane and Blades 1982). Nonetheless, it is clear that Britain did not have an unusually high degree of public ownership, by European standards, even at the peak of public ownership before the 1980s privatisation programme began.

The Diffusion and Impact of the Corporation in 1910

With new and comprehensive data on the international spread of listed and unlisted corporations before the First World War, this article shows the prominence of common law and Scandinavian civil law in the process. This association is interpreted as demonstrating the strong contribution of liberal (laissez-faire) industrial stances. The findings confirm an extended version of Rajan and Zingaless hypothesis that trade and capital openness are necessary for companies to flourish. Despite the possibilities that companies were created for fraud and exploitation, countries using the corporate form more extensively before 1914 had higher GDP per capita. Through this process, the benefit of imperialism extended to British dominions, but not much, if at all, to British dependent colonies.

Why Employer-based Pension Plans? The Case of Britain

Private savings-often through employer-based pension plans-account for a larger proportion of retirement incomes in Britain than elsewhere. The strength of employer-based pension plans in Britain can be traced to a variety of factors; their early development and security are emphasized. The pattern of spread, with heavy concentration initially in bureaucratic firms, suggests that old-age saving entered the employment relationship around 1900 because large-scale bureaucracies needed conditional, lifetime payment systems. By the 1930s, the other main intermediaries for old-age saving, specializing in private provision on an individual basis, had moved into the market for collective, employer-based pension plans.

UK Corporate Law and Corporate Governance before 1914: a Re-interpretation

With contributions from across the disciplines of law, history, finance, and economics, Complexity and Crisis in the Financial System offers a truly interdisciplinary study of the relationship(s) between crises and complexity in the US and UK financial markets. Taken together, the contributions in this volume not only challenge many often taken-for-granted ideas about the nature of financial crises, but also broaden our understanding of the long-term causes (and consequences) of the global financial crisis of 2007–2008.