managerial revolution

managerial revolution

the growth in the number and professionalization of managers who do not own the companies they control. The idea of the separation of management from the ownership of business organizations, sometimes expressed as the divorce between ownership and control, is seen to rest largely on the progressive diffusion of shareholding at the same time as organizations both increase in size and become more technically complex. It is suggested that, as shareholding becomes both fragmented and ‘absentee’, and as the premium placed on professional, technical and administrative expertise increases, the professionalization of management fosters the emergence of a relatively homogeneous stratum of managers who both acquire effective control of organizations and have an orientation to both employees and wider society which is different to that of traditional capitalists. However, even when this thesis is accepted, there is debate about whether managers act either in their own distinct interest (Burnham, 1942) or with a broader social conscience, guided by professional values (Berle and Means, 1933). In any event the implications for developments in both stratification and CAPITALISM are profound. One theorist, for example, suggests that new authority relationships replace the traditional conflict of interests between employers and employees (DAHRENDORF, 1959). See also POSTCAPITALISM, POSTINDUSTRIALISM.

The thesis has not, however, remained unquestioned. Subsequent attempts to evaluate it involve more sophisticated analyses of patterns of shareholding (Zeitlin, 1974; Barratt-Brown, 1968), the stability and means of recruitment to board positions (Stanworth and Giddens, 1974), the values and ideologies of managers (Nichols, 1969), ‘decision-making in process’ (Pahl and Winkler, 1974), and corporate networks (Scott, 1979). Whilst these studies have their limitations, collectively they suggest that the managerial revolution thesis was premature. Some researchers have pointed to the similarity between owners and managers in their values, objectives and social origin, and have drawn attention to the way these similarities are upheld through connections and social activities (Nichols, 1969, Stanworth and Giddens, 1975; Whitley, 1974). It has also been suggested that those theorists who have based their arguments on analyses of shareholding concentration have done so on the basis of questionable methodology. In the approach adopted by Berle and Means, for example, both made dubious assumptions about the level of shareholding diffusion required for managerial control and encouraged the analysis of companies considered in isolation from others (Barratt-Brown, 1968; Zeitlin, 1974). Attempts to avoid such pitfalls have revealed a more complex and variable relationship between shareholding concentration and ownership control. Hence the particular constellation of investment patterns within and between companies will influence whether or not board members, who may collectively muster but a small percentage of total shares, can and do in fact control. Some theorists suggest, therefore, that whilst many shareholders are separated from company control, ownership is not. This is reinforced by findings that reveal the persistence, in some instances, and in particular sectors, of personal and family ownership and control of large corporations. Whilst the growth of both institutional investment in, and financial loans to, companies complicates the ownership-control relationship, it does not eliminate it. Indeed, given the tendency for these to go hand in hand with interlocking directorships, questions are raised about the progressive fragmentation of shareholding, the extent and implications of ties between institutional worlds, and the independence of managers (Hill, 1981).

Attempts to answer these questions are also significant for the broader analysis of the UPPER CLASS. In this respect, whilst the distinctions made between entrepreneurial, industrial and finance capitalists reveal subtle changes, e.g. in the intergenerational bases of CLASS composition, they do not preclude the persistence of a cohesive upper class which, aided by a network of interlocking directorships, has not relinquished significant control of capital to a ‘managerial TECHNOSTRUCTURE’ (Galbraith, 1979; Scott, 1979).

Among the more specific criticisms of the managerial revolution thesis are:

  1. a failure to distinguish between the allocative control exercised by top management (e.g. about future investment decisions) and the operational control of day-to-day corporate activities by lower managers (Pahl and Winkler, 1974);
  2. lack of recognition of the constraints exercised by the business environment, especially the way in which competition constrains and unifies management objectives in the direction of a balanced orientation to growth (investment) and dividends (shareholder earnings);
  3. the ignoring of historical and other contextual factors that may influence the kinds of management representation at boardroom level. In Britain, for example, personnel managers are regarded as less important in this respect than accountants and lawyers.

The managerial revolution thesis is clearly an important topic which is central to debates arising from attempts to theorize about contemporary society through concepts such as CAPITALISM, POSTCAPITALISM and POSTINDUSTRIALISM.

Collins Dictionary of Sociology, 3rd ed. © HarperCollins Publishers 2000
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