A FUNNY THING HAPPENED ON THE WAY TO BUYING OUT TWITTER
A REAL-TME CASE STUDY IN MANAGERIAL CLASS CONTROL
As I write this the Twitter-sphere, and larger online world is, well, a twitter with the news that Elon Musk is seeking to buy the social media company, purportedly to reground it as a more vigorous free speech zone. I appreciate that many people who might be sympathetic to the idea of Twitter becoming more committed to free speech may not trust Elon Musk. Let’s leave that whole discussion aside for this post. I only want to emphasize how all this serves to illustrate the points I made in my book, The Managerial Class on Trial, about how the managerial class has taken over as the dominant, ruling class, displacing the bourgeoisie.
We’re seeing this story acted out in real-time as the two big issues that have caught everyone’s attention are whether Twitter’s board of directors will allow the shareholders to vote on Musk’s offer, and whether the board will create a “poison pill” to sabotage Musk’s takeover effort. It appears that we now have an answer to the latter question:
So, yes, the managerial class cabal that constitutes the Twitter board (check out their biographies, here) does indeed seem to be the one’s really in control, contrary to whomever “owns” the company. Again, all this is a microcosm of how, despite the ostensible continuation of classic bourgeois capitalism, the managerial class has actually taken over the key sectors of the economy, laying the foundation for its capture of government in 20th century.
Here's what I wrote on the matter in my book:
As the large companies and their production processes grew in size and complexity [during the late 19th century], it became increasingly necessary to have a level of training in a variety of specialized disciplines which was generally lacking in the entrepreneurial class which originally founded most of the companies. And often subsequent generations lacked even the knowledge of the founders. This situation was compounded by such companies going public and selling shares. At this point, ownership starts to become increasingly fragmented.1 Coordinated action problems, combined with the inevitable challenges of the principal-agent dilemma – in which those hired to manage a firm soon know it much better than the owners hiring them (allowing the former to engage in all manner of self-dealing) – meant that in effect owners exercised very little actual control over top management in such firms.2
Increasingly, the politics of corporate governance has been contested on the terrain of shareholders’ rights advocacy, hostile takeovers, and poison pills. As James Burnham puts it, what really constitutes ownership? Regardless of the value of prior investment, if one is largely (even exclusively) reduced to collecting dividends and trying to get into office the best managers for optimizing those dividends, does that constitute ownership in anything but the most nominal sense? 3 By early in the 20th century, it was increasingly the managers who effectively controlled such companies. Further, as time passed, those managers have often used that control to direct revenue away from dividends and toward investment in infrastructural expansion, which still further entrenched the nominal owners’ reliance upon professionally trained, scientifically sophisticated managers to run the companies that they ostensibly owned.4
What early analysts of the rise of the managerial class may not have been well equipped to anticipate is that such managerial class cabals would be willing to torch shareholder profits, not merely for their institutional control, but for the reality-curation benefits that such control provided. In any event, the current Musk-Twitter drama comes as no surprise to anyone who has been paying attention to managerial class analysis.
The classic work on this historic process, originally published in 1932, is Adolf Berle and Gardiner Means, The Modern Corporation and Private Property, 2 edition (London ; New York: Routledge, 2017).
Gary J. Miller, Managerial Dilemmas: The Political Economy of Hierarchy (Cambridge, MA: Cambridge University Press, 1992), chap. 6.
Gouldner makes the interesting case that when a union turns its pension fund over to a bank to invest in a stock, the union may own it, but the bank controls the stock vote. Ownership gets complicated under the managerial revolution. Alvin Gouldner, The Future of Intellectuals and the Rise of the New Class: A Frame of Reference, Theses, Conjectures, Arguments, and an Historical Perspective on the Role of Intellectuals and Intelligentsia in the International Class Contest of the Modern Era (New York: Seabury Press, 1979), 14.
Miller, Managerial Dilemmas, 166.
Wow and thank you !