rethinking Jerry Davis

I’ve spent the past few days at the EGOS meetings in Rotterdam. If you’re not an organizational scholar, EGOS is the acronym for the European Group for Organizational Studies – an interdisciplinary network of organizational scholars from both sides of the ocean. The theme of this year’s meeting was about reimagining and rethinking organizations during unsettled times. Naturally, they asked Jerry Davis – who has done more reimagining and rethinking of organizational theory than most – to be the keynote speaker.

Jerry’s keynote was, as expected, a witty, concise, empirically-driven argument for why the corporation has ceased to be a major institution in society (the impromptu dancing was an unexpected delight). If you’re not familiar with his argument, you should really read his book, Managed by the Markets, a real page-turner that explains how the growth of financial markets accompanied the deterioration of the public corporation as a major employer and provider of public welfare in contemporary society.  I’ve heard him give a version of this talk several times, and like every other time I left his talk feeling uncomfortable with some of his conclusions. Feeling uncomfortable is an understatement. I disagree with his conclusions. But I still think that Jerry has done an excellent job of marshaling data that can lead to a scarier and even more cynical conclusion than the one he claims.

Jerry’s evidence for the deterioration of the corporation as a major social institution has five major points. First, he shows that employment is no longer predominantly manufacturing-based. Given that major corporations were also the biggest providers of manufacturing employment, the transition of these jobs out of our communities has meant that the average Joe has fewer direct ties to big corporations than was true in the past. Interestingly, he also shows that the number of manufacturing jobs in China has declined too, and thus it is not merely a US phenomenon. Second, public ownership of corporations is no longer widely dispersed and has become increasingly concentrated in a few large shareholders, like the Blackstone Group. At the same time, as Mark Mizruchi has demonstrated, the old guard elites have become increasingly fragmented and there is less cohesion among the elite directorate than was true in the past. This means that there is also less agreement among the elite about the best way to use public corporations to serve public ends. Third (and this is really a product of the previous two), corporations have become less accountable to employees and have become more beholden to large shareholder blocs. As a result companies are less stable than ever before, constantly being subject to the threat of takeovers, restructuring, etc. Fourth, due to this instability, the corporation no longer has fixed boundaries. Corporations are capable restructuring quickly and often. And fifth, because of their lack of fixed boundaries, corporations have malleable existences, capable of shifting faces, dying and being reborn with new names and identities to continue their existence and purpose for wealth accumulation. In one of the great lines from his talk Jerry said, “Pop-up organizations don’t have to bear the costs of being a social institution.” Corporations have become employee-less (or nearly so) shells that move through supply chains, sucking value from local communities and then disappearing into the financial ether.

The big conclusion that Jerry draws from this is that corporations are no longer as important as they once were, and therefore organizational scholars ought to refocus our imagination on other types of organizations. The hope for the future, he argues, is to examine organizational innovations that put more power and control in the hands of communities and employees. For example, we ought to study new organizational forms, like crowdsourcing, Maker Faires, and wikis, if we want to develop a hopeful societal future.

I certainly don’t disagree with Jerry that there is value in studying new organizational forms that have the potential to transform communities. But I have problems with his more general conclusion. Jerry’s evidence about the transformation of the corporation is convincing, but I think we can arrive at completely different conclusions if we interpret the data differently. Here’s my take: the corporation has morphed into a super-actor that occupies a position of tremendous power and influence in today’s society, in part because it is less dependent on employees, communities, and the state. Its lack of dependence on real people means that most corporations are now less embedded than ever before but they still have needs for resources – including financial resources that have become concentrated in the hands of a small elite group of investors. So, the corporation is still a very real and important institution for the wealthy, and it is a social actor at the height of its power and influence due to its lack of accountability to local communities. As the state and community have waned in their ability to control the corporation, it has become the most influential actor in global politics.

In another way, Jerry’s findings are a vindication for the Marxists of the industrial relations school, like Braverman, who warned of the potential for technology to displace workers and make manufacturing jobs obsolete. This seems to be increasingly the case. But it’s not only manufacturing jobs that are at risk. Financial technology has made the old corporate form obsolete, replacing them with shape-shifting corporations that need only a few hundred people to steer the ship. We really do seem to live in a world of organizations imagined half a century ago by cynical neo-Marxists.

There are good reasons to distrust unbound, people-less, soulless corporations that have billions of dollars of market capital and no social mandate to use those dollars for public benefits. The accumulation of power and concentrated influence sounds to me like a dangerous organizational form that we, as organizational scholars, don’t fully understand yet. Rather than turning our attention away from the corporate actor, I think our attention needs to be focused on understanding the politics and power dynamics that shape its influence, and inasmuch as we offer prescriptions of our own, we ought to be thinking of ways to deal with the massive power imbalances it has created. Yes, there is also a need to study organizational forms that offer bottom-up solutions for building communities, but if this becomes our sole focus, we will have lost our ability to be critical of the corporation and of the power it exerts.


Written by brayden king

July 5, 2014 at 3:53 pm

Posted in brayden, power, the man

10 Responses

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  1. Thanks to Brayden for the thoughtful comments (and for not posting a video of my impromptu interpretive dance). I will try to avoid a tl;dr response to the extent possible, and in that spirit recommend that folks who want the short-and-sweet summary of the evidence on corporate collapse (largely accumulated since “Managed by the markets”) read this: . A startling fact is that the number of public corporations in the US has declined by 55% since 1997, going down every year but one. There are more fun findings like this in the paper.

    I would dispute Brayden’s interpretation that “organizational scholars ought to refocus our imagination on other types of organizations.” I certainly don’t want scholars to ignore corporations, even as their numbers shrink. But we will mis-understand their significance if we fail to recognize important trends undermining the corporate form and how they relate to alternative ways of organizing economic activity. I’m sure someone could get a great dissertation out of studying Borders, Nokia, DEC, and Encyclopedia Britannica, but they would want to mention Amazon, Apple, Linux, and Wikipedia to make sense of things. And note that some of these alternatives don’t look like formal organizations at all; I would argue that this is what could be coming next.

    Corporations are a reasonable way to organize economic activity when the activity entails economies of scale or requires relatively long-lived investments (e.g., petroleum refining). If an activity can be done by a kid in a dorm room with a credit card and a laptop, or by a bunch of brogrammers sitting around a table who rent server capacity from Amazon Web Services, or by designers who make their products in batches at TechShop, then corporations might not be the most economical way to organize. Corporations’ quasi-permanence as institutions imposes costs, and due to various technological and other changes, there are many sectors where they will no longer be economically sensible. (Investors are currently funding another frothy period of startup mania, but I would not advise investing your pension fund in our current versions of and AOL.)

    Brayden’s most critical assertions start with “the corporation has morphed into a super-actor that occupies a position of tremendous power…” This statement requires some backup, rather than just being asserted, and to speak of “the corporation” rather than particular corporations invites us to be inexact and fuzzy. Which corporations are powerful, and what is the basis of that power? GM? Eastman Kodak? BlackBerry? Sony? I would certainly agree that many types of corporations are “less dependent on employees, communities, and the state” (as these were themes of my last book) and would further argue that they are less dependent on finance. (Virtual corporations require surprisingly few resources, because they can often rent rather than buy capacity.) But not being dependent is not the same thing as being powerful. Back in the days when antitrust mattered, market share used to be a measure of power; large employers had power because they controlled the location of facilities. Neither works well now, for various reasons explained in the paper above.

    Here’s a good homework assignment: come up with an account of “corporate power” that works today and provides some empirical traction. For corporate power to be a useful idea for social science, we ought to be able to define it and measure it, at least in principle. A recent paper I wrote (to be posted shortly) suggests that many of us would agree that Goldman Sachs, Walmart, and Google are all powerful corporations in some vague and perhaps incommensurable way. Goldman is powerful because it pays huge sums to its highly educated workforce, charges large fees to corporate clients, and has a revolving door with Washington, while having regular contact with only the tiniest fraction of the population. Walmart is powerful because it can pay penurious wages to its less-educated (and highly transient) workforce, few of whom end up with cabinet positions, and manages to force giant corporations like Kraft, Procter & Gamble, Tyson, Pepsico, and many others to sell it good for very low prices, which it passes on to its consumers (who include the vast majority of the US population). Google is powerful because it collects vast personal data through the provision of indispensably useful search engines and browsers that it gives away absolutely free of charge. Is there any empirically tractable way to think about the power of these corporations, or is “power” just an indication of our unease?

    Over to you, Brayden!


    Jerry Davis

    July 7, 2014 at 9:20 pm

  2. Thanks for the great posts.
    I have one question: Jerry says that there are 55% fewer public corporations than in 1997. What is happening to them? I assume they aren’t simply disappearing but are more likely going private and seeking finance from sources other than financial markets (e.g. private equity). What do the data say about this?

    If that is true it complements Brayden’s point that many firms access finance from an elite group of wealthy investors rather than the widows and orphans of the world. It seems that there are both push and pull factors, there isn’t the need for capital as in the past but also, if you’re a company without a ton of capital needs, why deal with the headache of financial markets, activist investors, SOX regulations etc.

    So what are we talking about here, public corporations or any big business that has investors? Are we talking about the decline of a legal definition or of a mode of accumulating and distributing wealth?


    Richard B

    July 7, 2014 at 11:20 pm

  3. @Richard: great questions, and here are some OK answers. Some household names from the Dow index are still around in some form–Westinghouse tried various ways to restructure in the 90s, bought CBS and other media businesses, sold off all the non-media businesses and changed its name to CBS, moved to NY, got bought by Viacom, then spun off again as CBS, then spun off the outdoor advertising business… Woolworth morphed into Foot Locker, International Harvester into Navistar, ITT into various spinoffs. One big chunk of corporate disappearances happened when the dot-com bubble burst in 2000, and a lot of implausible startups all disappeared through delisting and, generally, liquidation because they had no value as going concerns (which would include and hundreds of others–watch for another round of this in coming months when companies that went public on the basis of one or two apps or games, or ideas that look just like Uber or WhatsApp). Another big die-off was ca. 2008 during the crash, when large retailers like Circuit City and CompUSA and Linens n Things were liquidated and various firms like GM went into bankruptcy, from which many never returned. Others get acquired or go private (e.g., Dell, Dominos Pizza). After being acquired, many are effectively shuttered, while their brands and/or patents live on; after going private, some emerge again as publics but surprisingly many do not because the market for public listings of such firms can be modest.

    A surprising thing is that while giant employers disappear (e.g., Circuit City had 43,000 employees), the companies that IPOed since 2000 are generally small and typically do not grow bigger in employment (although they might in market cap). The Zyngas and Groupons are not going to grow into Eastman Kodak or Westinghouse. By far the biggest job creator among newly public corporations is Game Stop, a strip mail computer game retailer that has a lot of shops employing part-time teenage boys. Twitter, conversely, has 2700 employees, and Kayak has 200. (If you’re interested, it is here:

    It is worth being clear that an LLC is not a corporation, and that private companies (like Koch Industries) can behave very differently from public corporations, and that an Ireland-based Accenture can be different from a US one. This is not just a trivial switch in nomenclature, and we would not want to lump them all into the category “corporation.”



    July 8, 2014 at 1:32 pm

  4. Lots of great stuff here in the comments. Thanks for paying attention to my little potshots from the balcony seats Jerry. And as a friendly warning, I may or may not have recorded your pirouettes on my iPhone and may or may not be open to using them if we should ever have a very serious disagreement.

    You’re right, I was pretty loose in use of the terms “corporation” and “power” in the original post, mostly because I wanted to be provocative and make my point without getting stuck in definitions. But I inexactness and fuzziness are enemies of good social science, and so I’ll try to be a little more specific here. I did not mean to imply the legal form of the corporation in my use of the term, although we could certainly have a separate conversation about why the public corporation is no longer as prevalent as it once was. I am more interested in the creation of organizational actors – or organizations that are “capable of behaving in a purposeful, intentional manner.” Organizations can take different legal forms and still cohere as actors. So, when I talk about corporations as super-actors, I’m referring to the possibility of creating collectives that develop their own purposes, values, and behaviors that are semi-independent from the people who make them up. They strive to survive, attain status and power, and require resources to accomplish their goals. Organizations need people to survive, but as you point out, they don’t necessarily require a lot of employees. In fact, it may be the organizations that have fewer dependents that are capable of exerting greater power due to their enhanced flexibility and lack of obligations to constituents.

    And this brings us to the definition of power. It’s challenging to define, but I take an old-school resource dependence view of power. Power is a function of having fewer constraints on your actions and having sufficient resources to make others dependent on you and to carry out your agenda. So, the fewer obligations an organization has and the more wealth it accumulates, the more powerful it is. Organizations with a large market cap with few employees and a flexible supply chain are in positions of power (which is not the same thing as saying they exert influence/power). They can move across borders, hold governments’ feet to the fire if they don’t give them tax breaks or if they tighten regulatory or monitoring, etc. This definition of power also implies that really vast companies with a large employee base are not necessarily the most powerful. GM, Sony, and other has-been companies you make fun of are proof of that. The larger an organization’s employee base, the more obligations it likely has to those employees and the communities in which they live, and so the more constraints there are on its behavior. Another implication of this definition of power is that some of the more powerful organizations are those that are closely tied to the personalities/goals of their owners. If an organization has a small, cohesive ownership base, there will be fewer divergences in expectations among ownership and the organization should be more capable of carrying out the strategic vision of its owners. Of course, these organizations are also those most likely to violate societal expectations of what it means to be a good, responsible company. Power gives organizations hubris and the autonomy to act irresponsibly.

    So, my definition of power suggests that some very surprising companies may exert a lot of power. Of course, companies like Google come to mind, but they are also highly visible (and visibility is a constraint). I’m more concerned about the power exerted by the relatively invisible organizations that lurk behind the scenes. They often deal in critical resources that are not labor intensive or that can be outsourced easily. They may have flexible supply chains, which make them more nimble in the face of environmental changes. So, I played around a bit with Compustat data and created a ratio of total market value to number of employees. If you eliminate the small cap companies that have just a few employees, you end up with a pretty interesting list. The company at the top of the list is Facebook, which a number of academics have called out recently for abusing their power (see this essay by Zeynep Tufecki) and others have argued has essentially become a public utility. Other organizations at the top of that list include Mastercard, Netflix, and a bunch of biotech and pharmaceutical companies. What many of these companies share in common is that they are knowledge-intensive, rather than labor-intensive, and they often serve intermediary roles in our economy (like Mastercard or Netflix). Now I’m not saying this is the best measure of power (I think it would need to be combined with a more traditional measure of resource dependence a la Burt), but it does point to the intriguing possibility that in our current economy the most powerful firms aren’t involved in manufacturing at all.


    brayden king

    July 8, 2014 at 5:38 pm

  5. Jerry and Brayden: as I read through your posts about organizations, corporations, and power, I kept looking for something about the American political system, but beyond seeing the word “politics” a couple of times, you avoided the issue. Shouldn’t the “Citizens United” Supreme Court decision be taken into account? As I write this, North Carolina is being flooded with millions of dollars’ worth of political ads from national groups, many funded by the Koch brothers. North Carolina is turning into a key battleground state for control of the U.S. Senate. The campaign will not rise or fall based on $50 or $100 contributions from average citizens. Instead, organizations dependent upon huge donations from a tiny group of wealthy elites will control the airwaves, drowning any chances for a reasoned debate over the issues. The economic transformations that Jerry writes about were not foreordained by the nature of a generic capitalist system, but rather were enabled by a political system that only occasionally holds to account private actors doing stuff that harms the public interest. (Strictly speaking, the powerful private actors have succeeded because they’ve shaped the very definition of what it means to act in “the public interest.”)

    Steve Barley’s talk on the occasion of his winning the OMT Distinguished Scholars Award a few years ago directly addressed this issue:

    Steve said “The talk represents my first attempt to speak about a growing concern of mine: the role of the corporation in contemporary American democracy and my fears for our country’s future as a republic. I am unpleasantly reminded of this issue every morning when I read the newspaper. So I saw this occasion as an opportunity to talk about developments that deeply trouble me and that don’t get enough attention in our field.”

    I would love to get his take on the issues discussed in Brayden’s & Jerry’s posts.


    Howard Aldrich

    July 9, 2014 at 4:51 pm

  6. Thanks to Brayden and Howard for more smart and civil comments. Brayden suggests that corporate power comes from having limited constraints or obligations and controlling wealth/resources. Having few employees or ties to communities and flexible supply chains (i.e., being vertically dis-integrated) are thus a source of power. Although Brayden tips his hat to resource dependence theory, his interpretation suggests a lot of flexibility: in the canonical texts of RDT, size (such as having many employees) was a source of power, ties to communities were a way to build obligations, and vertical integration was a way to amass greater autonomy by taming unruly suppliers. Maybe Howard can resolve this seeming contradiction.

    That leaves wealth as the major source of power. A couple of observations about this idea. First, there is nothing particularly “corporate” about wealth as a source of power. The Koch brothers (or Sheldon Adelson, or whomever) have power because they have cash to throw around, and whether that cash comes from private business (the non-public Koch Industries, real estate, casinos), inherited wealth, investments in hedge funds, or ownership of corporate shares makes little difference: people that can throw money into politics can thereby have influence. Calling it “corporate” does not add clarity. Second, control of “wealth” is a tricky construct for public corporations. They might have a cash hoard (like Apple), which looks something like wealth, but their market capitalization represents the value of shares held by (generally) external investors, not by the firm itself. So, any measure of power that invokes market capitalization needs some elaboration: how, exactly, can a firm avail itself of power via its market cap?

    So: if we are reduced to a theory that says “wealth confers power,” then it does not add a lot to our understanding of specifically CORPORATE power, and if anything, private companies (perhaps organized as LLCs) confer a lot more potential for influence than the public corporations that have received the most attention.


    Jerry Davis

    July 10, 2014 at 12:47 am

  7. Howard makes a great point. In my original post I thought about going into the implications of the recent Supreme Court rulings (not just Citizens United but also McCutcheon v. Federal Election Commission). As the Court has interpreted the law as granting corporate actors even more rights and have essentially destroyed campaign finance limits, the relative political influence of corporations has risen dramatically. If the major source of corporate power is wealth, then these recent rulings have broken down the wall that used to weaken the relationship between wealth and political influence.

    This distinction is a historical one. In my earlier comment I was referring to between-organizational variation in corporate power, but Howard’s point is that corporations have greater power relative to other types of actors or collectives. It’s hard to figure out what an appropriate independent variable is that would measure these differences. Instead, we’re left with dependent variables – e.g., the effect of corporate lobbying on Congressional agenda-setting. I think studies like this are worth doing, especially in the current socio-political climate.

    One interesting hypothesis is that corporate wealth should translate into political influence more today than it has in the past.


    brayden king

    July 10, 2014 at 3:55 pm

  8. Speaking of self-promotion, here’s an essay that gives a historical perspective on corporate power in the US:

    In 1910, the US had no income tax, the Federal budget was less than half as large US Steel’s assets, there was no Federal Reserve, and JP Morgan and his minions collectively served on 44 corporate boards, including the largest competitors in many industries (e.g., GE and Westinghouse). Teddy Roosevelt warned at the time that corporate money was the greatest threat to American democracy, and everyone knew what he was talking about.

    In 2008-9, the largest US insurance company (AIG), bank (Citigroup), mortgage company (Fannie Mae), and manufacturer (GM) all because arguably wards of the state. In several cases they were required to fire their CEOs and board members at the behest of the Federal government. Meanwhile, almost no one can name the largest corporate owner in America or its CEO. We need a new conceptual vocabulary for contemporary corporate power to make progress; we will be hindered by talking about corporate power as if it were still 1910.


    Jerry Davis

    July 10, 2014 at 7:19 pm

  9. “Right now, the National Labor Relations Board is weighing the very question of what it means to be an “employer,” and therefore who has to come to the bargaining table when workers organize for better treatment.”


    Umut Koc

    July 11, 2014 at 11:43 pm

  10. the economy pictured in jerry’s stylized presentation (and it’s oh so stylish the handful of times i’ve seen it) reminds me of the first couple chapters of Chandler’s Visible Hand, that of a family-owned proprietary capitalism in which market relations (e.g. contracts and contingent labor) rather than organized hierarchies coordinate the economy.

    it’s rich individuals and family dynasties, not corporations per se, that wield tremendous influence on political elections and legislation because they’re acting primarily as private individuals (even if they do so under the guise of their privately-held corporations). this was the basic gist of the McCutcheon decision and part of the reasoning behind the Hobby Lobby decision (e.g. a publicly held corporation can’t deny coverage, but a closely held family-owned corporation with sincere religious beliefs can). maybe the fact that individuals can now acquire so much wealth through privately-held corporations and other forms of corporate banditry speaks to Brayden’s idea of disembedding corporations from society (really tax codes), but I’d agree with Jerry that labeling the Koch Brothers or Sheldon Adelson as examples of “corporate power” doesn’t quite fit since they seem to be advancing deeply personal agendas rather than corporate ones.

    if you look you take the top 5 industries lobbied Congress last year, you see a more mundane picture of corporate power at work (from the Center for Responsive Politics):

    Pharmaceuticals/Health Products $226,114,456
    Insurance $153,235,759
    Oil & Gas $144,878,531
    Computers/Internet $141,226,592
    Electric Utilities $129,882,034

    all five industries are those in which state involvement, regulation, and direct state capitalization have historically been the norm. and all five know that the passage of laws can make or break these industries and as such they take an active role in trying to shape the non-market means of controlling competition. if you look at top 5 industries by donations for the 2012 presidential election, you see a very different picture (again from the CRP):

    Retired $129,640,640
    Lawyers/Law Firms $43,971,780
    Securities & Investment $30,263,727
    Homemakers/Non-income earners $29,479,256
    Education $26,518,372

    reitred folks and homemakers don’t usually fit my image of corporate power. part of the discrepancy, yes, reflects campaign finance laws which limit the amount corporations can give versus individuals, but this hardly looks like the dominance of corporations over the political process (more could be said about the dominance of old people over younger ones in American politics considering the crucial 18-25 demographic has yet to “get out the vote”).

    what this admittedly anecdotal data suggests is that corporations are not doing anything different than trying to influence legislation that may affect them. with individuals or families, by contrast, you have a more unpredictable influence on politics in that private money motivated perhaps by ideology can be deployed across a range of issues and elections beyond those that immediately affect the individual.



    July 12, 2014 at 1:38 am

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