Beyond the Berle and Means Paradigm: Private Equity and the New Capitalist Order

29 Pages Posted: 1 Aug 2007 Last revised: 20 Nov 2007

See all articles by Stephen F. Diamond

Stephen F. Diamond

Santa Clara University - School of Law

Multiple version iconThere are 3 versions of this paper

Date Written: November 16, 2007

Abstract

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 misstatement 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.

Keywords: Berle and Means, Corporate Law, Corporate Finance, Capitalism, Private Equity

JEL Classification: B2, D23, B14, G23, G34, J5, K22

Suggested Citation

Diamond, Stephen F., Beyond the Berle and Means Paradigm: Private Equity and the New Capitalist Order (November 16, 2007). Available at SSRN: https://ssrn.com/abstract=1004234

Stephen F. Diamond (Contact Author)

Santa Clara University - School of Law ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

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