Dynamics of elite production

1. Historical snapshot

There are undoubtedly common features in Western societies concerning elite recruitment and grooming. In traditional European societies, the fundamental ingredient of elite production was heredity. The accumulation of both upper-class origins and wealth mainly brought by land in agrarian societies was the rule. The existence of alternative channels of recruitment derived either from peculiar favors accorded by a prince or a lord, or from military exploits and purchase of public offices. Alternative upward paths were partly founded on meritocratic criteria, enabling bright lowborn individuals to gain access to inner circles of power.¹ In the industrial revolution, as recruitment and promotion through patronage progres- sively gave way to elite recruitment via competitive exams and promotion by merit, meritocracy gradually supplemented privilege, but it never replaced it entirely.

With respect to elite education, it is noteworthy that for a long time there was no special dedicated educational system. Most heirs had private tutors or received the classical education given to upper-class sons by clergy. But the rise of new indus- tries, such as chemicals, and the aftermath of the managerial revolution, which were analyzed by Burnham (1941) and Chandler (1962), gave way to a new salaried top executive class who gradually overthrew the heirs of the founding families. The professionalization of leadership underlined by Michels induced an increasingly specialized training and the education patterns of elites went through major trans- formations from the late nineteenth century onwards. Brezis and Crouzet (2002) remind us that the progressive democratization of higher education (re)created a new separation of the educational system into an elite system and a non-elite system.² Cassis (1997: 133) shows, for instance, that during the twentieth century the tendency is for a growing influence of higher education in the production of elites; in 1907 respectively 35, 72 and 57 percent of English, French and German business leaders graduated from a university or an elite school, while in 1989 these propor- tions climbed to 64, 95 and 88 percent.

The channels of elite production have been affected by the successive social and industrial revolutions of the last two centuries. But the major consequence might be the resilience and unobtrusive reinforcement of elite separation from the masses, through the replacement of heredity and familial ties by selective dedicated educational systems and institutions. We shall return to these aspects later in an examination of the contemporary dynamics of elite production patterns.

2. Models of elite production

There is an extended literature on patterns and modes of elite production (Putnam 1976). From the idea of ‘sponsored and contested’ mobility (Turner 1960) to the analysis of interlocking directorates (Mizruchi 1996), from the analysis of the rela- tionships between business and politics (Mizruchi 1992) to more recent analysis of the role of social networks in the ‘small world’ of business leaders (Davis et al. 2003), it is highly difficult to put forward unequivocal findings, given that this has been a very productive stream of research. Yet it is possible, following both Useem (1984) and Pettigrew (1992), to underline three major modes of elite production. These are the inter-organizational production of corporate elite cohesion; the condensation of upper-class principles; and the paths of corporate ascent. In a few words, Useem (1984: 103–5) suggests typifying five stages of movement into the inner circles:

• company ascent, where movement into senior management ranks of a more or less large company operates under the scrutiny of top executives
• outside directorships, when lateral movements operate to place representative individuals on the boards of several other companies
• top management, when an individual gets access to the post of CEO or managing director
• association leadership, such as participation in the management of a leading association in business
• government consultation, such as becoming a ‘business ambassador’.

Naturally, these features are germane to the highest rank of corporate elite produc- tion. They stress nevertheless the fact that in most cases pathways to the top are dependent on an ability to combine internal responsibilities and functions with external visible duties. The channels of recruitment, the routes through which most aspirants for corporate leadership reach the top, are marked by several mechanisms and criteria (Putnam 1976: 46–7):

• the existence of gates and gatekeepers (how and by whom are the chosen few chosen?)
• credentials (what criteria must would-be leaders meet, what are the most highly praised academic awards?)

• turnover and succession policies (how, and how often, do incumbent leaders leave office?).

Interestingly, Putnam adds a fourth criterion, the ‘so what question’. In other words, from a political perspective, what is of utmost importance is to understand better the extent to which recruitment patterns affect the character of the elite and its politics. For example, as the methods shift from the permeability of the production channels, from hereditary systems offering one single path to the top, to lateral entries, from a selection by seniority (where, to quote Huntington 1973: 35, ‘power goes not to the oldest son of the king, but the oldest child of the institution’), to a selection by efforts and performance, the meaning of being a leader is fundamen- tally affected. Take the difference between contested and sponsored mobility (Turner 1960: 856). Contested mobility is a system in which elite status ‘is the prize in an open contest and is taken by the aspirants’ own efforts. While the “contest” is governed by some rules of fair play, the contestants have wide latitude in the strate- gies they may employ’ (1960: 856). In that case, established elites will not monop- olize successful upward mobility. Under sponsored mobility, ‘elite recruits are chosen by the established elite or their agents, as elite status is given on the basis of some criteria of supposed merit and cannot be taken by any amount of effort or strategy … Ultimately the members grant or deny upward mobility on the basis of whether they judge the candidate to have those qualities they wish to see in fellow members’ (1960: 856). In the latter system, elite production turns into elite repro- duction, as it is the foundation of the political agenda. Contested elite generation pertains to a pure democratic form of selection. Aspirants to leadership must think of themselves as competing because they form considerable identification with incumbent elites through the process of selection, which is actually a process of indoctrination and education. Sponsored policies of elite generation rest on the necessity to educate the masses so as to make them regard themselves as ‘relatively incompetent to manage society’ (1960: 859), cultivating the belief in the superior competence of the elite group.

Useem (1984) underlines compellingly that the three elite generative mecha-nisms act simultaneously but according to different degrees:

• In the upper-class principle, where the corporate elite is seen as a ‘business aristocracy’, a social network relying on specific kinship and private-familial connections, and academic pedigree is intermingled with social prominence.
• In the class-wide principle, where the corporate elite is produced through transcorporate networks such as acquaintanceship circles, webs of ownership, and interlocking directorates, Useem argues that the efforts of leaders to promote the broad needs of big business as a community instead of defending the interests of a single corporation are bolstered.

• In the corporate principle, the corporate elite is defined by organizational mechanisms of career and selection management and by the position of the organization in its environment, especially the economy.

The social and political foundations of these three principles are evidently different, even opposed. Each puts the emphasis on a specific political purpose. Upper-class mechanisms enhance the perpetuation of a restricted segment of the population based on the maintenance of a social and cultural distance with the governed, a distance which is the condition of legitimacy of the elite group; the objective is, therefore, to generate a belief in the persistence of disconnected and impermeable social worlds vested with different sources of political power and legitimacy.

Class-wide mechanisms and, singularly, interlocking directorates, are interpreted differently, according to the perspective chosen. From a resource-dependency per- spective, they are means of facilitating economic interconnections, of exchanging rare resources such as highly skilled people. Interlocks are designed to reduce the uncertainties created by the relationships developed between firms (Pettigrew 1992: 166). From a ‘class-based’ perspective (Zeitlin 1974; Useem 1984), elite power stems directly from interlocks, because they generate and help the perpetuation of cohesive ties based on the class-wide interests of the corporate elite. But as Pettigrew argues, studies of interlocks say relatively little concerning how networks make use of such power. How and why ‘the powerful’ are ‘bolstered by linkages outside the firm and checked by non elites inside the firm’ (Pettigrew 1992: 179) remains a mystery if we do not include in the analysis the power of organizations to shape, at least partly, their own structures of authority through selection mech- anisms of career management.

Useem sees ‘the new powers of the transcorporate networks’ as being the indirect product of ‘the declining power of individual companies’ (1984: 150). Nonetheless, studying elite power requires one to accept coexistence between class-wide logics and corporate logics in the social fabric of elite formation and reformation. The power of corporate elites is evidently based on their capacity to ‘transcend the parochial interests of single companies and sectors, and to offer a more integrated vision of the broader, longer-term needs of business’ (1984: 59). But such elites must also take into simultaneous account aspects of their internal political perfor- mance, as sketched in Chapter 11. Elites that are always hitting the airport tarmac and not taking care of business at home create vulnerability to a coup. In other words, elite production patterns affect the way management professionals are con- sidered inside organizations. In charge of elite–mass linkages and/or in charge of the ‘business as usual’ parochial preoccupations, these are the people who are prac- tically ‘running the business’.

The political purpose of elite production is to decide to what extent the elite should be socially and culturally homogeneous (Mills 1957: 19) or should incor- porate new blood and bodies, which raises, once again, the issue of pluralism and fragmentation of elites. Elite production patterns directly affect the degree of homogeneity of elites and therefore the degree of fragmentation of the elite body. We have already addressed the question of oligarchy because unified elites are potentially oligarchic. Dahl states that ‘the actual political effectiveness of a group is a function of its potential for control and its potential for unity’ (1958: 465). The more unified and cohesive the elite, the more capable they are of formulating moral reasons as to why they, and the other members of the dominant elite, should believe in their strength. We take the view that elite ideologies function more for the cohesion of the elite than they do for the subordination of the masses. If the masses believe them, well, that is an advantage, but it is not necessary: there are far too many mundane ways in which domination can be arranged for it to hinge on matters of ideology alone. For Mosca, people need ‘political formulas’, which are not ‘mere quackeries aptly invented to trick the masses into obedience … they answer a real need in men’s social nature; and this need, so universally felt, of governing and knowing that one is governed not on the basis of mere material or intellectual force, but on the basis of moral principles, has beyond any doubt a practical and real importance’ (1939: 71). Mills argues that elite power derives directly from a combination of factors, comprising psychological similarity, where elite members are of the same social type so that social intermingling occurs between different elite groupings, and coordination, as elites come to see that their diverse interests ‘could be realized more easily if they worked together, in informal as well as in formal ways’ (1957: 20).

Table 12.1 Some functions of the principles of elite production

We have summed up these different insights in Table 12.1. If anything, this table suggests that, as Davis and Mizruchi put it, in corporate governance ‘the economic and the social are inextricably linked. Board members are typically recruited from among friends and acquaintances of current directors. Conversely, relations that begin as economic ties often become overlaid with the social relations, and the resulting social structures shape corporate decision making’ (1999: 215).

When analyzing corporate elite power, one cannot eschew mentioning the central role played by commercial banks, especially in the US (Davis and Mizruchi 1999). Quoting Jackson in 1832 (cited in Roe 1994: 58), Davis and Mizruchi recall his words to the effect that ‘it is easy to conceive that great evils to our country and its institutions might flow from such a concentration of power in the hands of a few men irresponsible to the people’ (1999: 216). Nearly a hundred years later we find Wilson agreeing with him in 1911 that ‘the great monopoly in this country is the money monopoly’ (Brandeis 1914: 1). Board interlocks can thus be analyzed as means of domination by investment banks. The chain of interlocks is not a para- noiac phantasmagoria; the intermingling of banks and commercial enterprises is a reality. Kotz (1978) argues that banks control most of the largest US corporations through their trust departments. If we go back to the issue of elite homogeneity, it is interesting to note, with Davis and Mizruchi, that in the US, of the 648 largest US corporations in 1982, directors of 43 percent served either on the Chase Manhattan board or on other boards with Chase directors (1999: 218). One can draw the conclusion that, ‘by anchoring the interlock network, bank boards provided a mechanism for political and governance cohesion among the corporate elite, albeit unintentionally’ (1999: 220). Even if the social organization of corporate elites is more scattered and disorganized (Lash and Urry 1987) and more decentralized as economies move from a banking-based to a capital-market form of financial inter- mediation, the view of interlocks as institutionalizing a practice of power which produces cohesive and sometimes coercive kinds of inter-organizational ties remains valid (Perrucci and Pilisuk 1970). Palmer and Barber note that such a corporate elite is an actor and attains power not only because of their organiza- tional and institutional relations, but also because of their position in a ‘multi- dimensional social class structure’ (2001: 88). It is a view of power based on the assumptions that the ‘corporate elite pursue acquisitions to increase their wealth and social status’, which entails a classical Marxian analysis of the role of ownership in relations of production (see Marx 1976). Additionally, it assumes that social, familial and educational background (Domhoff 1967) as well as positions in net- works (Mizruchi 1996) are of considerable significance in relations of power. The established elite, in whatever way it criticizes and contests challenges, will resist new claimants through its participation in interlocking networks (Useem 1984). Maintaining or attaining power in these networks is achieved through extended social ties and, through these, control of business norms, which can be used to question, marginalize and otherwise seek to repel those ‘challengers’ who dare violate them (as when hostile bids are qualified as ‘rapes’).

3. Contemporary dynamics of elite production

As many commentators have noted, the corporate upheavals of the 1980s and 1990s have modified the power structure of most big corporations. In a nutshell, the idea is that the massive movements of mergers, acquisitions, re-engineering, downsizing and corporate governance dynamics may have affected the distribution of power between the organizational ‘center’ and the ‘organizational body’ (sub- sidiaries, senior executives, employees) through an ambivalent tendency of political recentralization and administrative (operational) decentralization. The differenti- ation of agendas between the top circles of corporate power and the manifold number of subunits and subgroups that are more or less vested with a delegation of powers has increased. The best gauge of this is the ratio of top to bottom salaries in an organization. The 1980s and since have seen the chasm grow much wider in many European and US businesses (and in the US it is notably wider than in Europe; in Japan the ratio is far smaller) such that the wedge between the ‘governors’ and the ‘governed’ is larger than ever.

What remains fascinating is the extent to which channels of elite produc-tion have been affected by those wedges and chasms whose materiality defines contemporary organizations. To grasp better the nature of corporate elite power in today’s corporations, one still needs to evaluate the degree of resilience of well- established patterns of elite production. Here we follow the hypothesis that, if the channels of elite production have proved to be highly resilient, the criteria of recruitment and the consecutive leadership profiles may have started to transform.

Source: Clegg Stewart, Courpasson David, Phillips Nelson X. (2006), Power and Organizations, SAGE Publications Ltd; 1st edition.