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² See Berle, Adolf A. and Means, Gardiner C., The Modern Corporation and Private Property (New Brunswick, N.J., 1997, originally published in 1932), 69Google Scholar.

³ Ibid., 72.

⁴ There has been some historical research done on pyramids elsewhere. See, for example, Morck, Randall K. and Nakamura, Masao, “Business Groups and the Big Push: Meiji Japan's Mass Privatization and Subsequent Growth,” Enterprise & Society 8 (2007): 543CrossRefGoogle Scholar.

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⁷ Morck, Randall and Yeung, Bernard, “Dividend Taxation and Corporate Governance,” Journal of Economic Perspectives 19 (2005): 163, 174, 177CrossRefGoogle Scholar ; see also , Morck, “The Riddle of the Great Pyramids,” 3Google Scholar.

⁸ Villalonga, Bellen and Amit, Raphael, “How Are U.S. Family Firms Controlled?” Review of Finance 22 (2009): 3047, 3062–63, 3075–76.Google Scholar

⁹ “Pharaoh Capitalism,” Economist, 14 Feb. 2009, 90Google Scholar ; Almedia, Heitor V. and Wolfenzon, Daniel, “A Theory of Pyramidal Ownership and Family Business Groups,” Journal of Finance 61 (2006): 2637CrossRefGoogle Scholar.

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¹¹ Ibid., 3.

¹² Morck, Randall, “How to Eliminate Pyramidal Business Groups: The Double Taxation of Intercorporate Dividends and Other Incisive Uses of Tax Policy,” in Tax Policy and the Economy, 19th ed., ed. Poterba, James M. (Cambridge, Mass., 2005), 135, 136.Google Scholar

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¹⁶ , Morck, “How to Eliminate Pyramidal Business Groups,” 145.Google Scholar

¹⁷ Mundstock, George, “Taxation of Intercorporate Dividends under an Unintegrated Regime,” Tax Law Review 44 (1988): 1, 7.Google Scholar

¹⁸ “Seligman Reports on War Finances,” New York Times, 28 Dec. 1918, 14.Google Scholar

¹⁹ Internal Revenue Code § 243 (1996) (70 percent exemption if the corporation receiving the dividends has an ownership stake of less than 20 percent, 80 percent for ownership stakes from 20 percent to 80 percent, and 100 percent for ownership stakes of 80 percent or more).

²⁰ , Morck, “How to Eliminate Pyramidal Business Groups,” 152.Google Scholar

²¹ Ibid., 168.

²² Ibid., 164.

²³ , Morck and , Yeung, “Dividend Taxation and Corporate Governance,” 174.Google Scholar

²⁴ Temporary National Economic Committee, Taxation of Corporate Enterprise (Washington, D.C., 1941), 59, 63.Google Scholar

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²⁶ Khanna, Tarun and Yafeh, Yishay, “Business Groups in Emerging Markets: Paragons or Parasites?” Journal of Economic Literature 45 (2007): 331, 341.CrossRefGoogle Scholar

²⁷ , Villalonga and , Amit, “How Are U.S. Family Firms Controlled?” 3075.Google Scholar

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²⁹ , Morck, “How to Eliminate Pyramidal Business Groups,” 153.Google Scholar

³⁰ Moody's Corp., Moody's Manual of Investments, American and Foreign; Banks, Insurance Companies, Investment Trusts, Real Estate, Finance and Credit Companies (New York, 1935), 2009Google Scholar ; “Atlas Corp. Head Traces Acquisitions of Other Trusts,” Wall Street Journal, 30 June 1937, 3Google Scholar ; Moody's Corp., Moody's Manual of Investments, American and Foreign Public Utility Securities (New York, 1935), 1405Google Scholar (Electric Bond & Share). General Electric, which founded Electric Bond and Share, exited in 1924: Bonbright, James C. and Means, Gardiner C., The Holding Company: Its Public Significance and Its Regulation (New York, 1932), 106Google Scholar.

³¹ In 1935 Central Power and Light dissolved two subsidiaries that had recently transferred away their assets. See Moody's Corp., Moody's Manual of Investments, American and Foreign Public Utility Securities, 638Google Scholar. Northern New York Utilities, which was intended to be the survivor of a consolidation of a utility group organized around the Niagara Hudson Power Corporation, cited in its application to the New York Public Service Commission for regulatory approval “the elimination of the necessity for maintaining such separate records and the economies in operation by the consolidated company.” See “Stockholders Back Merger of Utility,” New York Times, 22 Jan. 1936, 31Google Scholar. The Commission rejected the application: “Merger Plan Withdrawn,” New York Times, 15 Aug. 1936, 20Google Scholar.

³² Moody's Corp., Moody's Manual of Investments, American and Foreign Public Utility Securities, 1432Google Scholar ; Electric Power & Light Corporation, Annual Report (1937), 4Google Scholar. “Atlas Securities Would Merge Units”, New York Times, 10 June 1932, 29Google Scholar ; “Atlas Expansion Near Completion,” Wall Street Journal, 11 June 1932, 7Google Scholar ; “Atlas Corp. Proposes Final Step to Complete Consolidation Plan,” Wall Street Journal, 29 Sept. 1936, 3Google Scholar.

³³ 49 Stat. 803.

³⁴ “Investments Cut by Bond and Share,” New York Times, 6 Dec. 1935, 39.Google Scholar

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³⁷ , Morck, “How to Eliminate Pyramidal Business Groups,” 136.Google Scholar

³⁸ 48 Stat. 881.

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⁴⁰ Securities Exchange Act Release No. 989, ¶ 3, at 4 (26 Dec. 1936).

⁴¹ The total was higher once preferred shares were taken into account. See Smith, Frank P., Management Trading: Stock Market Prices and Profits (New Haven, 1941), 73Google Scholar , Table II (abstracting data from Table I of the materials prepared to support Securities Exchange Act Release No. 989).

⁴² , Morck, “How to Eliminate Pyramidal Business Groups,” 168.Google Scholar

⁴³ Theoretically, the selling off of corporate stakes induced by the introduction of taxation of intercorporate dividends could have taken longer than just a few years as a result of inertia or transactions costs, but this sort of postponed effect seems unlikely due to the economic dislocation associated with the start of World War II.

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⁴⁶ Wilson, Jack W. and Jones, Charles P., “An Analysis of the S&P 500 Index and Cowles's Extensions: Price Indexes and Stock Returns, 1870–1999,” Journal of Business 75 (2002): 505CrossRefGoogle Scholar , 529 (see figures listed under payout percent).

⁴⁷ Temporary National Economic Committee, Taxation, 60.Google Scholar

⁴⁸ Ibid., 40; Bureau for Internal Revenue, Statistics of Income for 1937, Part 2: Compiled from Corporation Income and Excess-Profits Tax Returns and Personal Holding Company Returns (Washington, D.C., 1940)Google Scholar , Table 5, 82–83. The amount of the tax on intercorporate dividends can be ascertained from Table 5 by calculating 15 percent of the figure in line 24 and multiplying by 0.15, the corporate tax rate in 1937.

⁴⁹ “Finance, Business, Economics,” Washington Post, 26 Dec. 1934, 18.Google Scholar

⁵⁰ Ellis, Charles D., “Repurchase Stock to Revitalize Equity,” Harvard Business Review 43 (1965): 119Google Scholar (urging companies to change their approach).

⁵¹ , Morck, “How to Eliminate Pyramidal Business Groups,” 148.Google Scholar

⁵² , Berle and , Means, The Modern Corporation, 84–85Google Scholar , Table XIII; Brian Cheffins and Steven Bank, “Is Berle and Means Really a Myth?” Business History Review 83 (Autumn 2009): 443, 453CrossRefGoogle Scholar.

⁵³ , Berle and , Means, The Modern CorporationGoogle Scholar. Their data on ownership and control drew heavily from Means, Gardiner C., “The Separation of Ownership and Control in American Industry,” Quarterly Journal of Economics 46 (1931): 68CrossRefGoogle Scholar.

⁵⁴ , Morck, “How to Eliminate Pyramidal Business Groups,” 138, 143.Google Scholar

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⁵⁶ See Securities and Exchange Commission, Report on the Study of Investment Trusts and Investment Companies, Part One: Origin, Scope and Conduct of the Study (Washington, D.C., 1939), 25Google Scholar (distinguishing “investment companies proper” from an invest ment company/ holding company hybrid the SEC labeled “management-investment holding companies”).

⁵⁷ , Bonbright and , Means, The Holding Company, 8–10, 12–14.Google Scholar

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⁵⁹ In the literature on pyramids, it is widely assumed that the outside investors will be shareholders in a publicly traded company, though theoretically a pyramid could exist without the relevant companies being traded on a stock market. See Villalonga and Amit, “How Are U.S. Family Firms Controlled?” 3060.

⁶⁰ Some researchers do argue that a stake of 50 percent is required for control, but it is commonly assumed that a smaller stake will suffice (e.g. 20 percent). On this point, See , Morck, “The Riddle of the Great Pyramids,” 2Google Scholar ; Levy, Marc, “Control in Pyramidal Structures,” Corporate Governance: An International Review 17 (2009): 77CrossRefGoogle Scholar , 78–79, 81, 87.

⁶¹ , Berle and , Means, The Modern Corporation 69.Google Scholar

⁶² Compiled from ibid., Table XIII. Berle and Means's basic control taxonomy was “management control,” “legal device,” “minority control,” “majority ownership,” and “private ownership.” Pyramiding was treated as a means of control by “legal device,” and for those companies where there was any doubt about the ownership categorization (i.e. there was no majority shareholder and ownership was not highly diffuse), Berle and Means specifically indicated whether ultimate control was achieved by pyramiding or was of a different sort. Compiled from Berle and Means, The Modern Corporation, Table XIII; on the particular companies see 93–94.

⁶³ , Bonbright and , Means, The Holding Company, 77.Google Scholar

⁶⁴ Ibid., 79; see also “Holding Firm Abuse Mostly in Utility Field,” Chicago Daily Tribune, 30 Jan. 1938, B5Google Scholar.

⁶⁵ , Bonbright and , Means, The Holding Company, 81–82.Google Scholar

⁶⁶ Ibid., 80; see also 87.

⁶⁷ Tippetts, Charles S. and Livermore, Shaw, Business Organization and Control: Corporations and Trusts in the United States (New York, 1932), 229.Google Scholar

⁶⁸ Compiled from Berle and Means, The Modern Corporation, Table XIII.

⁶⁹ , Bonbright and , Means, The Holding Company, 227–28.Google Scholar

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⁷¹ See Securities and Exchange Commission, Report Part Two, 414–15.

⁷² Securities and Exchange Commission, Report Part Two, Table 123. The New York Stock Exchange officials, when they issued guidance in 1931 cautioning against pyramiding in the investment trust sector, were targeting this sort of three-tiered structure: “Cross-Holding of Trust Shares,” Wall Street Journal, 8 May 1931, 9Google Scholar.

⁷³ Morck acknowledges the point, writing “the largest U.S. pyramids were built around utility companies.” “How to Eliminate Pyramidal Business Groups,” 148.

⁷⁴ Compiled from Berle and Means, The Modern Corporation, Table XIII.

⁷⁵ , Bonbright and , Means, The Holding Company, 91Google Scholar , 95. Bonbright and Means said ten groups dominated electric power output, but indicated that one (Consolidated Gas of New York) was not oriented around a holding company (p. 114).

⁷⁶ , Tippetts and , Livermore, Business Organization and Control, 2nd ed., 184Google Scholar. See also “Holding Firm Abuse”; EBASCO Services, Inc., Electric Utility Financing (New York, 1948), 22–23Google Scholar.

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⁸⁷ “American Cities Power and Central States Sell Electric Shareholdings,” Wall Street Journal, 30 Nov. 1938, 3Google Scholar ; “Many Public Utilities Affected by Williams's Divestment Plan,” New York Times, 13 Nov. 1938, 61Google Scholar.

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⁹³ Energy Information Administration, Public Utility Holding Company Act, 11.Google Scholar

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⁹⁶ , Anderson, “Public Utility Holding Companies,” 251Google Scholar ; Seligman, Joel, The Transformation of Wall Street: A History of the Securities and Exchange Commission and Modern Corporate Finance (Boston, 1982), 257–58Google Scholar.

⁹⁷ Morck, Randall K. et al. , “The Rise and Fall of the Widely Held Firm: A History of Corporate Ownership in Canada,” in A History of Corporate Governance Around the World: Family Business Groups to Professional Managers, ed. Morck, Randall (Chicago, 2005), 65, 97–101CrossRefGoogle Scholar ; Morck, Randall K. and Nakamura, Masao, “A Frog in a Well Knows Nothing of the Ocean: A History of Corporate Ownership in Japan,” in History of Corporate Governance, ed. Morck, , 367, 381–97Google Scholar.

⁹⁸ 38 Stat. 730 (1914). On this point, See Gugler, Klaus, Mueller, Dennis, and Yurtoglu, B. Burcin, “Insider Ownership Concentration and Investment Performance: An International Comparison,” Journal of Corporate Finance 14 (2008): 688, 696CrossRefGoogle Scholar (citing, though, §8, which deals with interlocking directorships, rather than §7). There remained, however, substantial scope for complicated corporate structures to emerge involving non-competing companies: , Bonbright and , Means, The Holding Company, 75–76, 78Google Scholar.

⁹⁹ , Masulis, , Pham, and , Zein, “Pyramids,” 35–40.Google Scholar