Encyclopedia of Sociology

CORPORATE ORGANIZATIONS

corporations. This perspective treats corporations
as systems in which the interests of owners clash
with those of workers. Owners, it asserts, seek to
reduce uncertainties and to eliminate the vagaries
that can plague organizations. From this angle,
bureaucracy serves the interests of owners prima-
rily because it reduces the influence that workers
exercise and thereby removes a source of uncer-
tainty (Braverman 1974; Edwards 1979).

Workers need not have formal authority in
order to affect outcomes within organizations.
Studies document the creative ways in which em-
ployees enliven monotonous jobs and pursue their
own ends (Roy 1952; Mechanic 1962; Burawoy
1979, 1985). Yet, officially, the higher levels have
greater power than have the lower levels. This is
the consequence of the bureaucratic nature of
corporations, not of their pattern of ownership.
The bureaucratic mode is not unique to corpora-
tions. Proprietorships and partnerships can dis-
play the traits of bureaucracy. The diffuseness of
ownership that one finds in the corporation possi-
bly makes formal control less obvious than obtains
when ownership resides in identifiable persons.

OWNER VERSUS MANAGERIAL CONTROL

Managers occupy important places in the contem-
porary organization. One argument regards man-
agers as more powerful than stockholders. Adolph
Berle and Gardiner Means offered this argument
in the 1930s. As Berle and Means saw the situation,
stockholding had become too widely dispersed for
any individual holder or even group of holders to
command corporations. Managers, they contend-
ed, filled the void (Berle and Means 1932). Later
discussions echoed the thesis that the expansion of
the corporate form had raised the power of corpo-
rate managers (Berg and Zald 1978; also see Chan-
dler 1962, 1977).

Critics contend that the thesis overstates the
role and power of managers. They base their
criticism on studies of the influence that corporate
leaders wield. Maurice Zeitlin (1974) helped launch
this line of research when he argued that few
scholars had tested the Berle and Means thesis and
that the handful of extant studies showed owners
to be less fractious and fractionated than the thesis
supposed. Michael Useem (1984), among others,

heeded the call from Zeitlin for research on the

networks that link shareholders. Useem conclud-

ed from his study on contacts and networks among

large shareholders that a corporate community

operated, held together by an inner circle whose

interests transcended company, region, and indus-

try lines. Beth Mintz and Michael Schwartz (1985)

examined the connections between financial insti-

tutions and other corporations and decided that

control over corporate directions rested dispro-

portionately in the world of finance. The work

from the critics cautions us against the assumption

that a multiplicity of owners implies control by

managers.

SOCIAL CONTROL OVER CORPORATIONS

The corporate form constitutes a remarkable in-

novation. But as the corporation has become ever

more active and entrenched, it has generated prob-

lems for society. Corporations have at times en-

gaged in criminal behavior (Sutherland 1949;

Clinard and Yeager 1980). At other times, their

actions have violated no law but have put the well-

being of the public at risk. Both situations often

show the inadequacy of the mechanisms through

which society attempts to control corporations.

Corporations are creatures of the state. Osten-

sibly, then, they operate only at the indulgence of

the state. But myriad corporations now have great-

er resources than do the states that chartered

them. Moreover, the laws that states have at their

disposal often fit individuals better than they do

corporations. Corporations can be sued for wrong-

doing; but a fine that would bankrupt an individu-

al might be a mere pittance for a large corpora-

tion. Both James Coleman (1974) and Christopher

Stone (1975) have argued that the law can never be

the sole means for controlling corporations; a

sense of responsibility to the public must prevail

within corporations.

Even if the law were shown to be effective in

constraining corporations within a state, it might

prove rather impotent in the case of multinational

organizations. A multinational or transnational

corporation holds a charter from one nation-state

but transacts business in at least one other. The

governmental entity that issues the charter cannot

alter the policies the corporation pursues in its