The Corporate Pyramid Fable (Revised)
Steven A. Bank
University of California, Los Angeles (UCLA) - School of Law
Brian R. Cheffins
University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)
December 20, 2010
Business History Review, Vol. 84, No. 3, pp. 435-58, 2010
University of Cambridge Faculty of Law Research Paper No. 11/04
UCLA School of Law, Law-Econ Research Paper No. 11-02
Although corporate pyramids are currently commonplace world-wide and although there have been “noteworthy pyramiders” in American business history, this controversial form of corporate organization is now a rarity in the United States. The conventional wisdom is that corporate pyramids disappeared in the U.S. when New Deal policymakers began taxing dividends paid to corporate shareholders. This version of events is more fable than truth. The introduction of the intercorporate dividend tax did not foster a rapid dismantling of corporate pyramids. Instead, pyramidal arrangements were already rare in the U.S., other than in the utilities sector, and the demise of utility pyramids was prompted by the Public Utilities Holding Company Act of 1935 rather than tax reform.
This version should be referred to in preference to the version that appeared in print in the Business History Review, as this version incorporates a number of editorial changes not incorporated into the print version.
This is the revised and published version of an earlier working paper: http://ssrn.com/abstract=1544023.
Number of Pages in PDF File: 25
Keywords: Corporate Pyramids, Dividends, corporate Taxation, Holding Companies
JEL Classification: G30
Date posted: January 18, 2011 ; Last revised: January 23, 2011