Lost from view: the legal invisibility of managers in the U.K

In this chapter, we explore the evolving relationship between managers, directors, shareholders and companies over the course of the twentieth century. Focusing on the U.K., we show that, during the first half of the twentieth century, an absence of law allowed managers to acquire considerable de facto authority and power within companies, and that this was legitimated by reference to the specific competences that managers possessed. The role of management was not only to rationalize production and to reduce costs, but also to develop new capabilities and to devise strategies by which enterprises would innovate by exploring the unknown, a role which brought with it new social responsibilities. Company law, which predated the emergence of professional management, allowed space for managers to operate with the autonomy necessary to perform these functions, but did not guarantee it, making it vulnerable to later changes that sought to put shareholders back at the heart of the company. The second half of the twentieth century witnessed a succession of hard and soft law reforms which progressively diminished managerial autonomy and authority, transferring power to shareholders and independent directors. This transfer coincided with a move away from managerial conceptions of control, with their emphasis on balancing the competing interests at stake in the enterprise, towards an unbalanced system that creates powerful incentives for executives and managers to transfer value to shareholders (and themselves). As a whole, the chapter shows that law and soft law have exercised a powerful influence over the way in which companies are managed and governed in the U.K.