Abstract
Since the publication of The Modem Corporation and Private Property, by Adolf A. Berle, Jr. and Gardiner C. Means, economists have written extensively on the proposition that ownership and control have been separated in the large corporations. Additionally, the effects of this separation on the conduct of corporate enterprise have been the subject of many investigations. The present standing of financial economists on this issue is formalized by Jensen and Meckling. They consider the managers as the agents of firm's stockholders and conclude that a certain amount of agency costs is unavoidable. These costs, they argue, emanate from pecuniary as well as non‐ pecuniary expenditures by the managers to maximize their own utilities that will be detrimental to the firm's stockholders.
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