The Rise of the Managers

Abstract

In this chapter I discuss the rise of the managers in the first half of the twentieth century and the implications that managerial practices had, and still have, on business in general. I use this analysis to gain additional insight into the collapse of Australian HIH, American Enron, and Lehman Brothers. Management is a relatively new phenomenon that emerged more forcefully with the rise of the corporation in the early years of the twentieth century. The rise of the managers had an enormous effect on ownership. Prior to the advent of incorporated businesses the private owners or the family owners had also managerial responsibility for their businesses. With the rise of new business forms and incorporated risks the managers took a more predominant role and as a consequence a separation of ownership from management occurred. In other words, when managers took control over the means of production, which also includes services, the owners lost direct control over how their money was used and invested. The incorporated firm became the working place of the managers in the roles of chief executive officers, chief financial officers, and chief operational officers, also known as executive managers. The managers represent a separate group/class driven by self-interest. Not only employees and workers are subjected to the decision-making power of the managers. So, also, are owners, shareholders, and, increasingly, societal stakeholders.