Who Are Business Elites - Coursework Example

Business Elites Who Are Business Elites? The business elites are the senior most directors and executives of the largest companies in the world. They have direct control over wealth-generating property and make significant investment and employment decisions that seriously determine the direction of a country’s economy, including discharge decisions and plant locations that define regional economic prosperity and the life opportunities of the people who work for the firms they control (Woodrow and Acland, 2012:23). Economic property and, to a large degree, employment, have been unequally concentrated among a small number of firms for many decades. For example, in 1933 in the United States, the 200 biggest nonfinancial firms accounted for 57% of the property of all nonfinancial corporations. By the mid 1970s, the comparable figure percentage was 35. These 200 corporations accounted for about 19% of nongovernmental labor in 1975. A few individuals – the business elite – are, therefore, unequally control the economic potential of many countries across the world (Hendrick, 2013:43). Unsurprisingly, therefore, concerns over how the people who form the business elite come to possess and exercise corporate control, and how deep their influence runs, are of major interest among disciples of elites in society. Where Do Business Elites Come From? The standard narrative is straightforward: at the advent of capitalism in many countries, control came via direct ownership, because founder-proprietors and their offspring managed the companies in which they owned considerable stakes. As the enterprise expanded, the capital also grew, and ownership of large firms became distributed among thousands of shareholders while the management of companies increasingly remained in the hands of professional managers who owned relatively little stocks themselves (Clarke, 2012:34). This precipitated the separation of control and ownership popularised by Berle and Means, where fragmented proprietors have little effective company control while managers enjoy more control with little ownership. Hypothetically, this created a scenario of managerialism in which senior managers enjoy greater discretion to seek their own ends with little obstacles from the demands of stockholders (Edwards, 2014:29). Where corporate control through ownership is absent political and bureaucratic processes within businesses become crucial in determining who rises to the top of the corporate ladder. Organisation scholars have created sophisticated concepts to explain which functional departments – finance, sales, legal, manufacturing, etc. – become powerful within the company. Resource dependence scholars contend that organisational departments gain power by effectively managing the important contingencies in the corporation’s environment. They use this power to entrench democratic procedures favourable to the influential department which make sure that its outlook dominates both later internal power tussles and corporate strategy. Consequently, the CEO’s and other executives’ departmental experience provide evidence on which departments have power within the corporation (Gupta, 2012:31). Once they are in power, CEOs with various functional backgrounds seek typical organisational strategies that embody their training and experience. For example, companies with manufacturing CEOs tend to acquire suppliers in order manage production risks while companies with sales and marketing CEOs are prone to acquiring companies with related product portfolios in order to capitalise on synergies. While units initially acquire power by implementing procedures for growth, individuals advance in firms by having elite educational histories and being inducted into social networks (Ishikawa and Saisho, 2013:51). Consequently, CEOs are more likely to have studied at elite colleges, or to have descended from elite families if they did not study at elite colleges, than other senior managers and personal growth within companies if often directly linked to the nexus of social contacts that managers develop and maintain. Ascension into senior management is controlled – nominally – by the board of directors which, as the representative of the shareholders’ body, occupies the apex zenith of the corporate ladder (Hall, 2013:15). However, board members often owe their positions on the board to the managers who welcomed them. By regulating membership on the board to which they answer, CEOs and other senior managers can better ensure control within the firm and, subtly, to scrutinise potential entrants into the business elite (Hines, 2012:33). Bureaucratic and organisational processes within corporations and network functions across companies regulate entrance into the business elite, and via its control of these processes the business elite form, effectively, a self-sustainable oligarchy. Sensemaking The sensemaking process is another way in which business elites emerge. It consists of three main processes: locating, becoming and meaning-making. Locating relates to the creation of a reference axis in space and time, stories offering spatial syntaxes that control transitions from one setting to another (Maclean, Harvey, and Chia, 2012:20). Meaning-making (re)establishes an individual’s unity by connecting the components of experience into a clear whole via the expression of personal beliefs and values. The amalgamation of episodes and events into a developing story shows an element of the emergence of things. Sensemaking and storytelling are closely linked to the types of self-legitimation. The associations between the three sensemaking functions and the each of the 4 types of legitimacy-claiming espoused by corporate leaders in justifying their success show how the skilful elite can use personal narratives to exhibit the right image at the right time (Maclean, Harvey, and Chia, 2012:22). Storytelling offers an effective medium for legitimacy-claiming by corporate leaders. Stories told may be remembered later and perpetuated further, instantaneous nature enabling a link with the listener and magnifying the message. People need a sense of their place. The numerous constructions created by individuals place them in context, retroactively attaching events in time and space, and legitimating many perspectives and establishing their selves. This allows them to harmonise the intricacies of location, including dis-location and the duplicity of location. Locating and its connection to organising, particularly for corporate leaders, is demonstrated by many business elites across the world (Maclean, Harvey, and Chia, 2012:24). Experience is useful mainly because it is possible to recount it. Meaning-making is a process that typically results in the expression of a conviction, opinion, or a lesson for other people. Business elites understand that business should be about more than monetary gain to be meaningful. Business elites create meaning not only for themselves, but more importantly, for the people around them, within their firms and beyond, the availing of explanations that make working life appear relevant and useful in and of themselves. Business elites understand that they must look to the future, and they must do it in a way that no other people within and outside their domain can. This gives them an edge when it comes to corporate leadership and management. Overlaying and entrenching sensemaking exhibited by corporate elites in life-history stories is a continuing pursuit of legitimacy. The four stages of legitimacy-seeking are: defying the odds; staying the course; succeeding using talent; and giving back to the community. Business elites use these stages to portray themselves as successful persons, and these stages make a unique appeal to legitimacy, but all of them serve to augment the self-esteem of the subjects (Maclean, Harvey, and Chia, 2012:27). Defying the odds represents success in spite of adversity in circumstances that might initially seem to be an impossible dream. Staying the course assigns accords personal legitimacy within the corporation, representing dedication and resilience, while securing workers’ belief in the leader. The subtle message is that, while others can lack resilience, the committed leader has enough staying power to ensure success (Maclean, Harvey, and Chia, 2012:29). Business elites often exhibit a strong sense of personal success, depicting themselves as self-made, showing that they have acquired their positions on merit, using application and skill, succeeding using talent. Espousal of self-belief commands support and inspires confidence. Narratives containing self-promoting explanations may, however, border on narcissism. The most powerful legitimising strategy used by business elites in life-history stories is the statement of giving back to the society. Giving charitably is a vital component of the elite formula, part of the recognised archetype for corporate elites. It is present in all but three of the life-history stories, 4 strongly and 9 more implicitly (Maclean, Harvey, and Chia, 2012:31). Each of the stages of self-legitimation determined within the life-history stories of business elites are used to develop an impression and further an agenda. Using these modes, business elites portray themselves as important and successful human beings located in a specific time, organisation or space to which they belong; interpret to convince a social audience to relate to their messages; and nurture their futures in their domains of power. In claiming self-legitimacy, business elites can have a greater objective beyond management and the improvement of self-esteem (Maclean, Harvey, and Chia, 2012:34). As multi-positional personalities within the domain of power, business elites create common objectives with others in issue-based factions formed to create good resourcing and legislative decisions. A good image is a vital component in any campaign to secure public and elite backing for their objectives. Business Elites and Strategy Members of the business elite share one overriding master objective; to maintain their power to appropriate or distribute economic resources in their control as they wish; without meddling by either state officials or labor unions and, more recently, stockholders. Securing management independence is the standard used by business elites to assess government policy, as well as the underlying factor in managerial strategies (Korine and Gomez, 2013:45). Beyond one interest in ensuring autonomy from state and other meddling, however, members of the business elite share few obvious class objectives that could join them in common cause, and have a lot that divides them. Over the last couple of decades, scholars have dedicated considerable time and resources to the question of how business elites influence corporate strategy (Korine and Gomez, 2013:49). Most of these studies have been based on one of two common theoretical views: agency theory and upper echelons. While both views concur that business elites’ dispositions and wants affect corporate strategy, the upper echelons approach tends to stress the impact of demography-based dispositions and wants (Plessis and McConvill, 2014:31). On the other hand, the agency theory approach tends to stress the impact of position-based dispositions and likes. To be specific, upper echelons proponents argue that there is a strong correlation between business elites’ demographic attributes like age, functional history experiences, education, and their cognitive values and premises, which in turn influence their strategy dispositions and needs (Lotto, 2012:46). Agency theorists concentrate on structural assessments of corporate governance plans and how boards of directors match the preferences of shareholders and executives. As a matter of fact, agency theorists are less keen on the demographic attributes of business elites, stressing instead the governance roles occupied by business elites on boards; for example, whether they are executive or non-executive directors or CEOs. Business elites manage the most important affairs of corporations; therefore, they are the most significant influencers of corporate strategy. It is well-known that CEOs and directors (executive and non-executive) sit on company boards (Murray, 2012:48). Company boards are the decision-makers who determine the strategic direction adopted by a firm. CEOs of large corporations perform the same duties as those in small or medium-sized companies, which is that of implementers (McManners, 2014:67). CEOs of large corporations only qualify as business elites because of the level of control they enjoy, the locus of this control, and the amount of resources they manage. Business elites manage budgets running into billions of dollars and determine the how, why, what and when of their investments. Chairman and executive directors have a major influence on appointments and dismissals, budgeting, and investment options. It is safe to say that business elites shape corporate strategy more than any other personalities in large corporations. The relationship between corporate strategy and business elites is critical to the multiple ways in which modern corporation exercise power. To understand boards better, it is important to learn more about the mentalities, conduct and inclinations of board members. Elite business networks transcend business and reach into government and other domains in the society (Korine and Gomez, 2013:19). It is important to conduct more research into how large corporations operate so that people understand the real influence of business elites regarding the future of national business frameworks within the global economy. Conclusion The business elite are not just wealthy; they are also influential beyond all proportion to their scale. In some service and product classes, business elites are very few yet by far the biggest contributors to revenue (Mizruchi, 2013:12). They also manage corporations that contribute the most revenue to governments and also, in some countries, employ the most workers. There are two crucial benefits to understanding business elites. First, it provides a way to understand their roles and enhance these roles to improve business management (Hayes, 2012:36). Second, it is often easy to forget that business elites are also consumers of services and products like any other customers. Understanding their mannerisms and influences is important in meeting their needs as consumers. References Clarke, T. (2012) The SAGE handbook of corporate governance, London, SAGE. Edwards, B. (2014) The Rise of the American corporate security state six reasons to be Afraid, San Francisco, US, Berrett-Koehler. Gupta, S. (2012) Corporate governance for achieving corporate excellence (1. Aufl. ed.), Saarbrücken, LAP Lambert Academic Publishing. Hall, J. (2013) Money and power: thoughts and notes, Chicago, CreateSpace Independent Publishing Platform. Hayes, C. (2012) Twilight of the elites: America after meritocracy, New York, Crown. Hendrick, B. (2013) The age of big business a chronicle of the captains of industry (Abraham Lincoln ed.), New Haven, HardPress. Hines, R. (2012) Capital, entrepreneurs, and profits, London, England, Routledge. Ishikawa, A. & Saisho, T. (2013) Corporate strategy for dramatic productivity surge, Hackensack, NJ, World Scientific. Korine, H. & Gomez, P. (2013) Strong managers, strong owners: corporate governance and strategy, Cambridge, Cambridge University Press. Lotto, J. (2012) Corporate governance: a theoretical perspective of ownership and control, New York, LAP Lambert Academic Publishing. Maclean, M., Harvey, C. & Chia, R. (2012) Sensemaking, storytelling and the legitimisation of elite business careers, Human Relations, vol. 65, no. 1, 17-40. McManners, P. (2014) Corporate strategy in the age of responsibility (Illustrated Ed.), Chicago, Ashgate Publishing. Mizruchi, M. (2013) The fracturing of the American corporate elite, Cambridge, Massachusetts, Harvard University Press. Murray, G. (2012) Financial elites and transnational business who rules the world?, Cheltenham, UK, Edward Elgar. Plessis, J. & McConvill, J. (2014) Principles of contemporary corporate governance, Cambridge, England, Cambridge University Press. Woodrow, F. & Acland, S. (2012) Elite! The secret to exceptional leadership and performance, New York, Elliott & Thompson. Read More