Brokerage and Closure in Corporate Control: Shifting Sources of Power for a Fractured Corporate Board Network

Abstract

Structural sources of power have shifted dramatically in corporate America. Recently, the fracturing of the corporate interlock network threatens corporate managers’ capacity to act as a unified group in support of their shared interests, potentially destroying managerialism and elevating shareholder power. Paradoxically, however, the fracturing of the corporate elite has not led to a widespread retreat of managerialism. Corporate managers have replaced their collective structural resources, embedded in their board interlock network, with organizational structural resources located within their firms. By adopting lone-insider board structures where the CEO is the only employee on the board of directors, CEOs establish brokerage positions within their focal firms, allowing them to preserve their autonomy even as the broader network withers. Firms nested in cohesive communities were the first to adopt lone-insider boards, supplementing and eventually replacing closure with brokerage as a structural resource. These alternative structural resources operated to preserve managerialism during different times. Network closure traditionally helped to preserve managerialism against shareholder pressure, but this effect disappeared as the network fragmented in the mid-2000s. In its absence, managers increasingly relied on organizational brokerage positions to maintain their autonomy. Consequently, managerialism remains surprisingly robust in the era of a fractured corporate board interlock network because top managers have become more focused on establishing positions of power within their own firms.