Corporations are the productive engine of market economies. Yet the rules by which the wealth generated by corporations gets divided between the providers of financial capital and the providers of human capital are poorly understood. In this colloquium, a group of economists, social scientists, lawyers, labor relations specialists, business executives, and executives of financial institutions debate questions about the allocation of risks, returns, and rights in corporations that were raised in Margaret Blair's prior book, Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century (Brookings, 1995). In addition to Margaret Blair, participants include Bernard Aidinoff, Amatai Etzioni, Ronald Gilson, Martin Ginsburg, Mark Goyder, Oliver Hart, Bruce Householder, Tony Jackson, Bevis Longstreth, Jonathan Low, Bruce MacLaury, Ira Millstein, Nell Minow, Charles Rossotti, Charles Schultze, Kenneth West, and Sidney Winter. Roswell Perkins, of the New York law firm of Debevoise & Plimpton, served as moderator.

Since the mid-1980s, the corporate sector in the United States has been undergoing a fundamental, but still poorly understood, structural change. Corporate profits have been growing rapidly by historic standards, expanding by more than 40 percent in real (inflation-adjusted) terms in the years from 1985 through 1995. The value of stock market equities has grown even faster, with the S&P 500 index, for example, more than doubling in value, in real terms, during the same period.

Although profits at large corporations have risen, their employment has not, and pay for workers has risen less than in previous expansions. In fact, since the mid-1980s, one large corporation after another has announced mass layoffs and downsizing programs. By the mid-1990s the companies that compose the Fortune 500 had nearly 3 million fewer employees than they did in 1985.

To be sure, rising employment at smaller companies more than replaced the jobs eliminated at large corporations. But the new jobs typically paid less. Meanwhile the compen-