Definition: is a theory related to the subject of administration in public corporations, in which the control and ownership are disconnected, and the owners solely depend on the company’s board of directors to represent and protect their interests. According to this theory, over time, the firm’s management will completely dominate the board of directors, leading to the latter being unable to protect the shareholder’s interests, and the executives having a decisive say on most crucial matters. This theory is named after A. Berle and G. Means, the authors of “The Modern Corporation and Private Property” article.
In a Sentence:
I’ve never really believed in the Berle Means thesis. I mean, if you make sure that the board is comprised of trustworthy people, there shouldn’t be a problem, even in the long run.
Ever since Tom found out about the Berle Means thesis, he changed his mind about relying on the board of directors to protect his majority shares and decided that some serious structural changes were needed.
Synonyms and related words: public corporation, shareholder, board of directors, governance