Beyond the Berle and Means Paradigm: Private Equity and the New Capitalist Order
Stephen F. Diamond
Santa Clara University - School of Law
July 9, 2010
THE EMBEDDED FIRM, Cynthia Williams and Peer Zumbansen, eds., Cambridge University Press, Forthcoming
Santa Clara Univ. Legal Studies Research Paper No. 10-01
The rise of private equity funds represents a new stage in capitalism. These funds combine financial resources and capital markets expertise with detailed operational knowledge of the operations of takeover targets to maximize the creation and expropriation of value on behalf of investors. Their significant size and aggressive buyout record suggests that we may be witnessing the confirmation of Michael Jensen's 1989 prediction, made in the midst of the first wave of leveraged buyouts, of the “eclipse of the public corporation.” Critics of private equity share a view of the corporation rooted in a decades old characterization by Berle and Means of the nature of the modern corporation. Rethinking the framework of Berle and Means is an important first step in responding appropriately to the rise of private equity funds.
Number of Pages in PDF File: 39
JEL Classification: K22,B25,G3,G32,J5,P1,P12
Date posted: February 1, 2010 ; Last revised: August 15, 2010
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