Big Business and the State: Historical Transitions and Corporate Transformation, 1880S-1990s (Suny Series in the Sociology of Work and Organizations)

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Summary: Big Business and the State: The Author's Summary
Review: The crisis at Enron occurred within a corporate form capable of organizational flexibility and self-financing that was embedded in institutional arrangements characterized by a free market ideology, deregulation, and lax regulatory enforcement. Big Business and the State provides a historical analysis of corporate change and the political and economic conditions that lead to the contemporary corporate form, which permits managerial risk-taking and opportunism.

Big Business and the State shows that corporate property rights and the legal bases of ownership are crucial to understanding corporate behavior. The book examines how historical transitions in corporations political and economic environments affected the three most significant corporate transformations in the last 110 years. During each historical period, in response to economic crisis, big business mobilized politically to pressure state managers to realign the institutional arrangements in which corporations are embedded.

The particular form of political mobilization is affect by historical conditions and social forces and structures (e.g., state business policy) that define the parameters within which social actors pursue and realize their interests. Class-based political behavior affected change in state business policy that resulted in rapid corporate form change during the late 19th and early 20th centuries (1880-1905), the 1920s and 1930s, and the 1980s and 1990s. During each historical period when corporations' capacity to accumulate capital declined, capitalists mobilized politically and attempted to transform the institutional arrangements within which capital accumulation occurs.

After New Deal legislation created several disincentives to using the holding-company subsidiary form, corporations changed their subsidiaries to divisions. Whereas subsidiary corporations are legally separate entities that are wholly or partially owned by the parent company, divisions are part of the same corporation and are wholly owned by the parent company and cannot issue stock. By the end of the 20th century, most of the largest U.S. corporations had changed to the contemporary version of the holding-company subsidiary form. This form, the multilayered subsidiary form (MLSF), is a corporation with a hierarchy of two or more levels of subsidiary corporations with a parent company at the top of the hierarchy operating as a management company. The mean number subsidiary corporations in the largest 100 industrial corporations increased from 21 in 1981 to 49 in 1993. This corporate form change occurred after big business mobilized politically and lobbied state managers to overturned crucial New Deal legislation including the tax on capital transfers from subsidiary corporations to the parent company.

Parent companies can use their subsidiaries to issue stock and take on debt. Although the MLSF increases the organizational flexibility and self-financing capability of big business, its embeddedness in the institutional arrangement characterized by a free market ideology, a political environment of deregulation, and lax regulatory enforcement permit managerial risk-taking behavior and opportunism.