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The Intraorganizational Power Struggle: Rise of Finance Personnel to Top Leadership in Large Corporations, 1919-1979



Choosing a president in an organization is an important political decision that reflects who controls the organization and the bases for that control. In this paper, a model of power based on resources in the organization and the environment is specified in order to understand how power shifted between intraorganizational units in the 100 largest U.S. firms between 1919 and 1979. Early in the century, large firms were controlled by entrepreneurs or personnel who came up through manufacturing. In the middle decades, sales and marketing personnel controlled large firms. In the past 25 years, finance personnel have become increasingly dominant. These shifts resulted from changes in the strategy and structure of the organizations, changes in antitrust laws that promoted an increase in product-related and unrelated mergers in the postwar era, and the mimicking of firms in similar environments.
... Even when organizations share goals, they address problems differently because the search for a solution to problems (or pursuit of opportunities) happens in a context, and the structuration of an organization into subunits that exchange information shapes this context (Schulz, 2001). Similarly, decisions are made by managers occupying specific roles and holding responsibility for specific goals (e.g., Fligstein, 1987;Bidwell and Keller, 2014) and these goals naturally differ within and among organizations. Organizations have different objectives. ...
In the 20 years of Strategic Organization, how well has knowledge drawn from the behavioral theory of the firm contributed to the field of strategy? We see progress both in the pages of SO! and elsewhere in the field of strategy, but this progress has been held back by divisions between strategy and organization theory in what theories should predict, what mechanisms are preferable predictors, and what outcomes are of interest. Despite these divisions, the last few years have seen particularly rapid progress, turning the behavioral theory of the firm into one of multiple organization theory sources of strategy knowledge. It is time to reassess and consider the best future direction, and we propose a framework organized around how strategy is shaped by the 1) organizational structure, 2) organizational decision-makers, 3) organizational history, and 4) organizational environment. This subdivision captures the decision-making units in the theory (1-2), the importance of experience (3), and the role of context (4). We outline fruitful research topics based on this framework.
... For the sociology of organizations, coordination is also a relational issue product of strategic interactions and cognitive factors. The point of departure is that dependence is a basis for exerting power (Fligstein, 1987). Therefore, mutually dependent actors, whose actions and decisions influence each other, are interconnected through power relations that rest on negotiations leading to mutual adjustments (Bergeron, 2018;Pinson, 2015). ...
The thesis analyzes environmental policy coordination processes in cities. Based on acomparative case study of air quality and climate change policies in Mexico City and Paris, theresearch demonstrates that policy coordination in cities is a dynamic, sequential process whereactors from the four governance dimensions – urban, vertical, horizontal, and international –with different competences and perceptions on how their actions affect each other, interactstrategically under particular institutional configurations and cognitive references. The thesisdevelops a theoretical framework based on historical institutionalism, that addresses institutionsas changing, power distributional elements, and cognitive theories of public policy that explainthe organization of policy processes around ideational paradigms or frames of reference. Themain argument is divided into two parts. First, policy coordination results from the interplaybetween institutions that shape governance arrangements by distributing competences andestablishing frameworks for action, cognitive frameworks and ideational processes that definereferences, paradigms, and problems, and the strategic interactions taking place within. Thethree elements combine, leading to positive coordination, negative coordination, or conflict.Second, those arrays remain steady until changes in the institutional context, either abrupt orincremental, rearrange the interactions by altering the frameworks of action, leading to differentcoordination sequences. Hence, I argue that due to the changing nature of the institutionalcontext, coordination processes are sequential, rather than one-shot interactions.
This article examines the social construction of financial services organizations in two different social settings such as Chile and the UK, remarking how economic agents act within broader social structures, institutions and cultural environments. A qualitative design based mainly on semistructured in-depth interviews was applied in Santiago de Chile, London and Edinburgh with a broad sample of financial services professionals. The results show contrasting organizational procedures and working routines in Chile and the UK, explained largely by social distribution of resources and their positions within the global financial system. While in Chile organizations use exclusive channels to recruit members of the local economic elite, in the UK firms perform scientific-minded procedures aimed targeting a broad population of candidates.
Status attainment theories assert that individuals are recruited based on the length and functional background of their training. Elite theories assume that top managers often deviate from these socially acceptable mechanisms of status attainment to entrench their advantage. In this study, focusing on the US financial sector, we investigate whether educational institution prestige—rather than the subject or length of education—increasingly influences appointments to top executive positions. We analyze 1987 US top executive managers affiliated with 147 firms from both financial and non‐financial sectors in 2005 and 2018. Our study demonstrates that alumni of prestigious universities have a strikingly higher likelihood of attaining a top executive role in finance than in non‐finance. Within finance it is no longer investment banking, but private equity, that contains the highest proportion of elite university graduates. Our findings suggest that notwithstanding the major power shifts between finance and non‐finance—and also within the finance sector—elite groups still dominate the most symbolically valued education, and as a result, top managerial positions.
Institutions are collective responses to collective concerns, with the underlying link between concern and response being the purpose of the institution. With this conceptual lens, we analyze the history of the Aktiengesellschaft (AG), which emerged in Austria and Germany around 1800. While any analysis of the organizational features of the form would have diagnosed marked stability over the past two centuries, our historical study reveals significant shifts of the AG’s purpose and meaning: From a vehicle in the service of the public interest, shareholders, and employees to a persona with legitimate selfinterests and the will to survive. We suggest to regard such purpose drifts as distinct variant of institutional change. In addition, we conclude that the AG’s essentially political actorhood institutionalizes the ever fragile and delicate quest for a balance between the different legitimate interests on whose behalf a corporation acts (including those of the self). Such a view, we argue, can offer a future for the corporation as organizational form. © 2022 by Emerald Publishing Limited All rights of reproduction in any form reserved.
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The strategic-contingencies theory of intraorganizational power proposed by Hickson et al. hypothesizes that the power of subunits results from contingent dependences among them created by unspecified combinations of coping with uncertainty, workflow centrality (immediacy and pervasiveness), and nonsubstitutabilty. This paper report on methods devised to test this theory with alternative forms of data on seven organizations, or power systems, of four subunits each. The theory is refined by the exploration of different patterns of variables related to successive levels of power, and the tentative ordering of these variables in terms of their consequences for power.
Argues that the formal structure of many organizations in post-industrial society dramatically reflect the myths of their institutional environment instead of the demands of their work activities. The authors review prevailing theories of the origins of formal structures and the main problem which those theories confront -- namely, that their assumption that successful coordination and control of activity are responsible for the rise of modern formal organization is not substantiated by empirical evidence. Rather, there is a great gap between the formal structure and the informal practices that govern actual work activities. The authors present an alternative source for formal structures by suggesting that myths embedded in the institutional environment help to explain the adoption of formal structures. Earlier sources understood bureaucratization as emanating from the rationalization of the workplace. Nevertheless, the observation that some formal practices are not followed in favor of other unofficial ones indicates that not all formal structures advance efficiency as a rationalized system would require. Therefore another source of legitimacy is required. This is found in conforming the organization's structure to that of the powerful myths that institutionalized products, services, techniques, policies, and programs become. (CAR)
This note describes various types of power and discusses the nature of organizational politics.
Most attribute the current malaise of American business to the virus of inflation, the paralysis brought on by government regulation and tax policy, or the feverish price escalation by OPEC. Another view, however, says that responsibility rests not with general economic forces alone, but also with the failure of American managers to keep their companies technologically competitive over the long run. This controversial diagnosis draws on the authors' own extensive work in the production field as well as their recent association with Harvard's International Senior Managers Program in Vevey, Switzerland. Having taken a long, hard look from abroad at how American managers operate, they propose some strong medicine for improving the health of American business. 9 references.