Adolf Berle and Gardeners Means on separation of ownership and control.

Examination of pronciples

1. Adolf Berle and Gardeners Means on separation of ownership and control.

2. Professor Merrick Dodd on separation of powers. The phenomenon associated with publicly held Business corporations in which the Shareholders (the residual claimants) pose little or no control over management.

3. Ronald Coase on the nexus of contract This account, describes a corporation as a nexus of contracts between the various claimants to the earnings of the business—shareholders, directors, officers, employees, customers, suppliers and other factors of production The nexus of contracts model treats the firm not as an entity, but as an aggregate of various inputs acting together to produce goods or services. The set of contracts making up the firm consists in very large measure of implicit agreements, which by definition are both incomplete and unenforceable

4. Ronald Coase on the nexus of contract Continued The contractual nature of the firm does not preclude an element of command and control absent from market transactions the body of shareholders is not conceived to own the corporation. Rather, shareholders are conceived to have only contractual claims against the corporation The firm is a market in which parties with economic asset contract with the firm to deploy these assets in product activity. An individual’s assets are more productive when they are combined with the assets of others in joint or team production.

5. Ronald Coase on the problem of social cost If we lived in a world without transaction costs, people would bargain with one another to produce the most efficient distribution of resources, regardless of the initial allocation It is concerned with the actions of Business firms which have harmful effects on others

6. Ronald Coase on the problem of social cost continued

7. Eugene Fama and Micheal Jensen on the problem of agency cost An agency cost is an economic concept concerning the cost to a "principal" (an organization, person or group of persons), when the principal chooses or hires an "agent" to act on its behalf. The generality of agency problem arises when an agent is induced to behave as if he s maximizing the principal’s welfare Agency and the induced maximization of the principal's welfare exists in all organizations and in all cooperative efforts. The agency cost focuses on the normative aspects of the agency relationship, that is, how to structure the contractual between the principal and the agent to provide appropriate incentives for the agent to make choices which will maximize the principal’s welfare.

8. Eugene Fama and Michael Jensen on the problem of agency cost continued Agency cost is therefore the sum total of the monitoring expenditures by the principal, the bonding expenditure by the agent and the residual loss. It arises in any situation involving cooperative effort.

9. Margaret Blair and Lynn Stout on team production theory Corporate boards enjoy a broad range of discretion in setting corporate policy and allocating corporate surplus because they are in the best position to preserve and protect important firm-specific investments of not only shareholders, but also creditors, employees, and the larger community They introduced the “Mediating Hierarchy” model which according to them means that the According to public corporation is best viewed as a team of shareholders, creditors, workers, managers, and communities Directors of public corporations are best regarded as "mediating hierarchs," who are accountable to no particular constituency of the firm as against the shareholder primacy norm which sees the directors as agents.

10. Margaret Blair and Lynn Stout on team production theory continued

11. Daril Milton on communitarianism