Eyes on the Horizon? Fragmented Elites and the Short-Term Focus of the American Corporation

• In Event: 2434 - Economic Sociology Regular Session: Corporations and Elites

Abstract

In recent years, scholars and popular commentators have expressed concerns that U.S. corporations are too focused on short-term performance, thereby undermining their long-term health and competitiveness. This paper examines how this focus on short-term strategies and performance, or short-termism, results from the dissolution of the American corporate elite network. In particular, we argue that the corporate board interlock network traditionally served as an important collective resource that helped corporate elites to preserve their autonomy and control, mitigating short-termism. In recent years, changing board-appointment practices have fractured the board network, undermining its usefulness as a platform for collective action and exposing corporate leaders to short-term pressures. We develop and apply a cohesion metric for network managerialism, derived from theory and evidence in social-network scholarship. Using three indicators that capture short-termism earnings management and shareholder returns, we identify a structural basis for managerial short-termism that links external, network-based resources to managers’ decisions. The results highlight the benefits of the corporate elite network and illustrate unforeseen consequences of the network’s dissolution. 

Authors

• Richard Benton, University of Illinois

• J. Adam Cobb, University of Texas