Politics, Corporate Governance, and the Dynamics of German Managerial Innovation: Schering AG between the Wars

Conflicting interpretations of the evolution of German business between the two world wars and of Germany's corporate governance during the Third Reich are examined in this article. Alfred Chandler's view that major corporate changes emanated from managerial initiatives is contrasted with Harold James's interpretation that public and government pressures forced innovations on business. In support of James's analysis, I argue that state and political pressures, not management, initiated significant changes in German corporate governance and in the organization of German industry during the interwar period, especially in the 1930s. Using Schering AG, one of Germany's largest companies before World War II, the article traces the influences of National Socialist pressure and changes in corporate law on companies’ organizational adaptation to government social priorities during the Third Reich.