The rejection of industrial democracy by Berle and Means and the emergence of the ideology of managerialism

Abstract

One distinctive feature of the American variant of capitalism is the near absence of any of the industrial democracy institutions found in many European firms. This article examines ideology as a factor behind the absence of industrial democracy institutions in the United States. It focuses on the early 1930s, when the ideology of managerialism was being formulated by Adolf Berle and Gardiner Means, the authors of a book that had a well-documented influence on American business culture. As the article shows, many American firms in the 1910s and 1920s experimented with worker representation systems that contemporaries called industrial democracy. Berle and Means were aware of these moves to democratize the American workplace, but they rejected all forms of industrial democracy. The article advances an explanation for their rejection and thereby contributes to our understanding why the United States did not take the path towards democracy within companies.

For whom does the bell toll: a political analysis of criticisms of the Hawthorne studies

“…In addition, the government had abandoned direct intervention in the economy, settling for Keynesian deficit spending to ensure full employment. Finally, industrial democracy never had any real chance given even a noted liberal like Berle rejected it (Smith et al, 2019). In part, it was a decision by labor, constrained by the political circumstances, but labor leaders during and after the war gave up potential power for a proverbial seat at the table.…”

Management and business history – a reflexive research agenda for the 2020s

“…This conceptual idea, “dynamic sublimes”, has now been taken up in the study of sporting megaprojects (Andrew et al , 2020). In a similar vein, my work with Andrew Smith and Jason Russell on the militarising and managerialising impact of Berle and Means (1932) opened up intriguing possibilities for discussions with legal and industrial relations scholars, allowing for dual publication in these fields (Russell et al , 2017; Smith et al , 2018, 2019). This also signalled a shift from the possibility of just working on the histories of organisations towards the history of management ideas in themselves, a theme I explored further in my chapter on the development of strategic management (Tennent, 2020).…”

Editorial

“…Berle and Means (1932) looked systematically at the broad problem of the dominance of the American economy by firms characterised by dispersed shareholdings, ultimately arguing that managers held the balance of power to direct the allocation of resources towards more socially responsible aims. Berle and Means, influenced by the ethos of military service from the First World War somewhat paternalistically cast managers as dispassionate professionals able to direct the corporation towards the fulfilment of a higher social purpose, which might consist of more than the generation of wealth (Smith et al, 2018(Smith et al, , 2019. This view reflected a mid-20th century conceptualisation of management as a profession that could "get things done" within an ethical and moral framework, an approach perhaps most epitomised by the work of Peter Drucker whose core thesis was that the firm should profit by serving the needs of society.…”