COLUMBIA LAW REVIEW [Vol.91:10 Main Street America did not want a powerful Wall Street.Laws dis- couraging and prohibiting control resulted. I.BERLE AND MEANS A.The Classic Story Berle and Means'vision is central to corporate law scholarship. Their story is straightforward:"[T]he central mass of the twentieth- century American economic revolution [is a]. massive collectiviza- tion of cline of Pa oted to pro oduction with [an]accom pa nying de- d ecision-making and and a]mass dissociation of wealth from active management.This restructuring turns corporate law on its head:stockholders,the owners,become powerless.The stockholder's vote"is of diminishing importance as the number of shareholders in each corporation increases. diminishing in fact to ne gible 0 ance as the orpora ome giants.As the om rmely me Aoehela number of stockhol shareholders as a "passive"investment while managers control the corporation. The problem is not solely the separation of shareholders from managers or,as Berle and Means put it,the "massive dissociation of wealth from active management."The problem is atomization.Most public companies are held by thousands of shareholders,each with only a small stake.As a result,an active shareholder cannot capture all of the ng nagers. The costs of monitoring are ecomes ed,studies th te prise,or sits on the board of directors and thereby takes the risk of enhanced liability.But since monitoring gains would be divided among all shareholders,most fragmented shareholders rationally forego involvement. This disincentive to monitor has costs enterprises are run imper fectly as managers pursue their own agenda.Managers want high sala- ries,nice offices,and,if the firm is large enough,corporate jets. Occasionally they take corporate opportunities for themselves.Much ial ursue operating policies thati ealth. T ney want to grow ond an effi cient size for the prestige,power,and salary tha t comes with running a larger organization.Too large,the enterprise slows down;it runs less efficiently.5 25时o a shareholder with ldveto empire-building acquisiti ons 3.A.Berle G.Means,supra note 1,at xxv;see id.at 4-7. 4.Id.at xix. 5.See id.at 112-14;O.WilliamsoCOLUMBIA LAW REVIEW Main Street America did not want a powerful Wall Street. Laws dis￾couraging and prohibiting control resulted. I. BERLE AND MEANS A. The Classic Story Berle and Means' vision is central to corporate law scholarship. Their story is straightforward: "[T]he central mass of the twentieth￾century American economic revolution [is a] ... massive collectiviza￾tion of property devoted to production, with [an] accompanying de￾cline of individual decision-making and control[, and a] massive dissociation of wealth from active management."'3 This restructuring turns corporate law on its head: stockholders, the owners, become powerless. The stockholder's vote "is of diminishing importance as the number of shareholders in each corporation increases-diminishing in fact to negligible importance as the corporations become giants. As the number of stockholders increases, the capacity of each to express opin￾ions is extremely limited." 4 As a result, corporate wealth is held by shareholders as a "passive" investment while managers control the corporation. The problem is not solely the separation of shareholders from managers or, as Berle and Means put it, the "massive dissociation of wealth from active management." The problem is atomization. Most public companies are held by thousands of shareholders, each with only a small stake. As a result, an active shareholder cannot capture all of the gains from monitoring managers. The costs of monitoring are borne by the shareholder who becomes involved, studies the enter￾prise, or sits on the board of directors and thereby takes the risk of enhanced liability. But since monitoring gains would be divided among all shareholders, most fragmented shareholders rationally forego involvement. This disincentive to monitor has costs: enterprises are run imper￾fectly as managers pursue their own agenda. Managers want high sala￾ries, nice offices, and, if the firm is large enough, corporate jets. Occasionally they take corporate opportunities for themselves. Much more perniciously, many managers pursue operating policies that di￾minish social wealth. They want the enterprise to grow beyond an effi￾cient size for the prestige, power, and salary that comes with running a larger organization. Too large, the enterprise slows down; it runs less efficiently.5 A large shareholder might make a difference: a shareholder with 25% of the company's stock could veto empire-building acquisitions, 3. A. Berle & G. Means, supra note 1, at xxv; see id. at 4-7. 4. Id. at xix. 5. See id. at 112-14; 0. Williamson, The Economics of Discretionary Behavior: Managerial Objectives in a Theory of the Firm 34-35, 79 (1964). [Vol. 91:10