Alternative Explanations for Changes in Ownership Structure

Abstract

The governance of the public limited company has been a continuing and mainstream interest of economists since Berle and Means [1932/1967] made the 'division of ownership from control' the central feature of their investigation into US-style capitalism. This concentration on the investor-owned public limited company, however, diverts attention from alternative forms of governance which have featured prominently in the past, at least in certain industries. As HANSMANN [1996] shows convincingly, organisations such as consumer and supply co-operatives, mutual organisations, non-profit enterprises and even workers' co-operatives have represented a significant part of the organisational landscape in the United States. Very similar observations can be made of the history of corporate enterprise in the UK (Ricketts [1999]). Changes in the ownership structure of companies have often accompanied economic development. These changes may be economy wide, as in the gradual substitution of the public limited company for the unlimited partnership or private company during the late 19th and 20th centuries. Changes may take place in particular industries or sectors as in the recent trend away from mutual governance in parts of the financial services sector in the UK. PENCAVEL [2001] studies the rise of worker co-operatives in the plywood industry in the Pacific Northwest of the United States after the First World War, and their subsequent decline after the 1950s as the main centres of production moved elsewhere. Competition between governance arrangements does not occur entirely through the processes of new firm formation and bankruptcy, however, but also through changes to the governance structures of individual firms. Scottish Mutual, a Life Insurance Company in the UK, for example, was established as a proprietary company in 1883. It became a mutual company in 1952 by Private Act of Parliament, but then demutualised in 1991 and was acquired by Abbey National (itself a recently demutualised Building Society)1 . In some periods