The Control of the
Corporate Community

excerpted from the book

Who Rules America Now?

by G. William Domhoff

Touchstone Books, 1983

p56
Most sectors of the American economy are dominated by a relative handful of large corporations. These corporations, in turn, are linked in a variety of ways to create a corporate community. At an economic level, the ties within the corporate community are manifested in ownership of common stock on the part of both families and other corporations, as well as in joint ventures among corporations and in the common sources of bank loans that most corporations share. At a more sociological level, the corporate community is joined together by the use of the same legal, accounting, and consulting firms and by the similar experiences of executives working in the bureaucratic structure of a large organization. Then too, the large corporations come together as a business community because they share the same values and goals-in particular, the profit motive. Finally, and not least, the common goals of the corporations lead them to have common enemies in the labor movement and middle-class reformers, which gives them a further sense of a shared identity.

Whatever the actual number of stockholders, systematic studies show that most of them own very little stock. Robert Lampman's studies using the estate-multiplier method for six different years between 1922 and 1953 estimated that the top 1 percent of all adults held from 61.5 to 76 percent of all privately held stock. Using the same method, James D. Smith found the percentage to be 51 percent for the top 1 percent in 1969.3 Smith's work also demonstrates that stock is even more dramatically concentrated within the hands of a few thousand major owners. One-twentieth of 1 percent of American adults have one-fifth of the corporate stock, and 0.2 percent have one-third of it. Sociologist Maurice Zeitlin makes this concentration more graphic by pointing out that "the Rose Bowl's 104,696 seats would still be half empty if only every American who owns $1 million or more in corporate stock came to cheer."

p59
... hundreds of very large corporations ... are privately owned by a family or group of families. The size and extent of such corporations is often overlooked in discussions of the modern corporation. In 1976 Forbes estimated that there were over 350 such companies with sales above $100 million a year. Then, too, in some manufacturing industries that are less concentrated, such as printing, furniture, and clothing, privately held firms account for over two-thirds of sales, and privately held firms are even more important in such non-manufacturing sectors as wholesaling, retailing, and construction. Moreover, the close relationship between ownership and control also holds for many large publicly held corporations that are just below the 200 or 300 largest firms; in most such firms, large percentages of stock are held by a few owners who also serve as directors and top managers.

The problem of the relationship between ownership and control thus arises only for the very largest of corporations in the corporate community. Little direct information on their owners was available between 1938, when a thorough government study v - ` conducted, and the 1970s, when new government studies and improvements in the laws on the reporting of ownership information again made systematic analysis possible. For the 30-year period between, studies by pluralists that took at face value the meager information provided by official sources often concluded that the role of big owners within corporations was declining. This conclusion could not be shaken by the many examples to the contrary that would emerge in the business press from time to time.

However, even within the large corporations where no large owners seem apparent at first glance, there are ways in which families or wealthy individuals in fact continue to play significant roles.

p76
CONCLUSION

The overall findings on stock concentration, overrepresentation of upper-class people, and the socialization of rising executives lead to the conclusion that the upper social stratum is a business class based in the ownership and control of large corporations. Contrary to the view that there has been a separation of ownership and control in large corporations, it seems more likely that there has been a gradual reorganization of the upper class into a "corporate rich" that includes top-level executives as well as major owners. Such was the conclusion of Mills from an examination of the data available in the 1950s, and it seems even more correct in the light of the information on ownership and on executive behavior that has been developed since that time:

The propertied class, in the age of corporate property, has become a corporate rich, and in becoming corporate has consolidated its power and drawn to its defense new men of more executive and more political stance. Its members have become self-conscious in terms of the corporate world they represent. As men of status they have secured their privileges and prerogatives in the most stable private institutions o' American society. They are a corporate rich because they depend directly, as well as indirectly, for their money, their privileges, their securities, their advantages, their powers on the world of the big corporations.

The fact that the upper class is also intertwined with the corporate community adds a second dimension to the nature of its cohesiveness. The cohesion is not only social, based on school and club affiliations, but economic, rooted in common stock ownership and most visibly manifested in the complex pattern of interlocking directorships that unites the corporate community and creates a dense and flexible communication network.

The societal power exercised by the corporate rich through the corporate community is considerable. Corporate leaders can invest money where and when they choose; expand, close, or move their factories and offices at a moment's notice; and hire, promote, and fire employees as they see fit. These powers give them a direct influence over the great majority of Americans, who are dependent upon wages and salaries for their incomes. They also give the corporate rich indirect influence over elected and appointed officials, for the growth and stability of a city, state, or the country as a whole can be jeopardized by a lack of business confidence in government.

One of the clearest statements of the way in which economic power influences government is by economist Charles Lindblom in an article entitled "Why Government Must Cater to Business." The crux 0 f this argument is that in "our kind of society" the "big tasks of shaping and doing" have been entrusted to businesspeople who cannot be "commanded to perform their functions." Instead, they have to be "induced," which means they have to be given whatever they want, generally speaking, if there is to be prosperity. Therefore, the main job of government officials, elected and appointed, is to cater to business. If they do not do this job, there will be economic difficulties that will lead people to desire new political leadership: "These ills are not only deeply distressing to the population as a whole, but suicidal for public officials. That is because political leaders lose their positions if they cannot maintain a relatively healthy economy."

As useful as this straightforward argument is in explaining one of the ways in which members of the corporate rich exercise power in America, it is not sufficient. It does not take into consideration the possibility that government officials might turn to nonbusiness constituencies to support new economic arrangements or that the voting public might elect leaders mandated to change the economic system. In other words, contrary to the shortsightedness of such pluralists as Lindblom, it is not only political leaders who face the possibility of losing their positions when the economy is in distress. In such situations, the business leaders may need government to protect their private property. As Bertrand Russell notes in criticizing the "undue emphasis on economics" in understanding power: "The power of the industrialist rests, in the last analysis, upon the lockout, that is to say, upon the fact that the owner of a factory can call upon the forces of the State to prevent unauthorized persons from entering it.

Because there is no guarantee that the underlying population and government officials will accept the corporate viewpoint under all circumstances, it is necessary to consider the ways in which the personnel and the economic resources of the upper class and the corporate community are involved in an effort to shape the thinking of the American polity and to influence the federal government directly.

Who Rules America Now?

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