The Uses of Diversity. David Ellerman

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СКАЧАТЬ rel="nofollow" href="#litres_trial_promo">Figure 2.3 The Two Companies in a Publicly Traded American “Company.”

      The commitment-oriented logic of organizational design would be appropriate for a company, but the problem is that there are the two companies. The commitment-oriented design is applied, at best, to the de jure company. The shareholders are seen as the insiders, principals, members, and owners of the (de jure) company. When things are not going well, the shareholders are legally empowered to change “their company.” And since the people who actually work in the company, the de facto company, are seen legally as having only a market relationship to the company (the employment relation), their role is modeled on an exit-based logic.

      In the Anglo-American economies, starting from closely held firms (with little divergence between the de jure and de facto firms) the growth of the public market in equity shares has created these rather odd chimeras. And as the de jure firm (“ownership”) has diverged more and more from the actual firm, the legal theory broke down. The transaction costs for dissatisfied far-flung shareholders to organize and actually change things were very high. And the returns from organizing enough shareholders would be shared by all shareholders, so there was also a strong collective action problem. Hence, shareholders used the “Wall Street Rule”; if you don’t like the way things are going, exit by selling your shares.

      Hence, the people legally empowered to implement a commitment-based strategy (“change things”) use a de facto exit-based strategy (sell). And the managers and workers who are de facto in a position to implement a commitment-oriented strategy (“change things”) are seen legally as being outsiders (“employees”) on the other end of a market relationship with the company. They are not the principals or owners directly empowered by corporate law to change things—so in the eyes of the law, their only option is to quit (“exit”) if they are dissatisfied (love it or leave it). Any attempt of workers to organize in unions to secure rights in the firm is seen as antithetical to the exit-based logic of competitive markets. The union is seen as the party on the other side of a contract with the company, not as a part of the internal governance structure of a company. Any attempt of the workers, the members of the de facto firm, to formalize powers to directly “change things” is seen as infringing on the “management rights” exercised by the supposed agents of the far-flung shareholders who are the legal members of the company.

      Of course, this bizarre structure would not actually work. Some insiders gladly grabbed the levers of actual control dropped by the shareholders. Those insiders are the top managers, so we arrive at what Adolf Berle and Gardner Means called the “separation of ownership and control” (1932, 89) and at what is currently called the “corporate governance problem.” The legal theory or “model” is shareholder capitalism; the underlying actuality is managerial capitalism. Since there is no legal legitimation for the actual system, the public relations machinery in the companies, in the business press, and in academia has broadcast the goal of “maximizing shareholder value” while the managers show their actual goals in their salaries, benefits, perquisites, (manipulated) stock options, and golden parachutes. But recently, the high corporate executive members of the Business Roundtable (2019) have shown that they are no longer willing to pretend being the hirelings of the shareholders. They prefer the role of being seen as the custodians of massive social resources to be managed in the interests of all the stakeholders, not just the shareholders. That is a much more prestigious cover story for the realities of managerial capitalism. And by being accountable to all stakeholders, they are not only in practice but in theory accountable to no group in particular.

      And from the motivational viewpoint, the bizarre model structure would not work unless those who are legally outsiders on the other end of the employment contract—getting only the economic reward of salary or wage—were to a significant degree committed to and identified with the company. Although this is almost entirely ignored by conventional exit-oriented economics, Herbert Simon has emphasized the point:

      Organizations would be far less effective systems than they actually are if such (economic) rewards were the only means, or even the principal means, of motivation available. In fact, observation of behavior in organizations reveals other powerful motivations that induce employees to accept organizational goals and authority as bases for their actions. . . . (The) most important of these mechanisms (is): organizational identification. (Simon 1991, 34)

      Hence, the members of the de facto company do in fact tend to identify with the company even though they are legally outside the company!

      The large American firm is actually a rather odd and incoherent organization. Those who are legally inside the firm (shareholders) act as if they were outside, and those who are legally outside the firm (employees) act as if they were inside.

      This mismatch between the model and reality leaves the analyst in a quandary. Should one analyze the rather mythical company model as it exists in the lawbooks and in the economics textbooks? That is the “American model” broadcast to the world by ivory tower academics who might think that American companies actually work that way. But since actual organizations need a healthy dose of commitment-oriented behavior to work well, the archetypical exit-oriented “American model” is a textbook model only. The actual large widely held American companies use a version of the logic of commitment. But the top managers who assume and exercise the legal rights of the insiders (owners) often try to treat all the other employees as outsiders on an exit-based model (e.g., in the labor relations system). Hence, the actual large widely held American firm ends up being something of a contested battleground between the two logics.

      In any case, for analytical purposes we will juxtapose two rather pure models, a firm organized on an exit-based model and a firm organized on a commitment-based model.

      

      The Modern Japanese Company

      In their introduction to a book of essays by Japanese authors about the Japanese-style firm, Ronald Dore and Hugh Whittaker echo Herbert Simon at least about the Japanese case: “Most of the authors would agree that if you want to understand what goes on in Japanese boardrooms, you can throw most of the writings that go under the rubric ‘agency theory’ out of the window” (1994, 3).

      In the postwar era, the large Japanese firms have perhaps gone the furthest to develop the organizational logic of commitment and to contrast it with the logic of exit. For instance, to one trained to think in terms of the logic of exit, any immobilities, rigidities, or barriers to exit would just seem inefficient and irrational. But Japanese economists have evoked the example of useful barriers to exit as in the practice of a captain being expected to go down with his ship.

      The way in which underpayment of wages in the early years of service and the acquisition of firm-specific skills create barriers to exit is obvious. These exit barriers perform several important functions for the firm as an organizational entity. The first is the incentive function whereby the interests of the firm and the interests of the individual are linked. Unable easily to exit, people can only protect their interests by working to ensure that the firm prospers. . . . The interlinking of interests means that when crisis looms, efforts are redoubled. The option of leaving the sinking ship is not freely available, either to the crew or the captain. (Kagono and Kobayashi 1994, 94)

      Barriers to exit can enhance identification and thus X-efficiency.¹⁴ During the last quarter century, the township-village enterprises (TVEs) have been a driving part in the remarkable Chinese transition. But their success has been something of a mystery to the orthodox economic viewpoint—lack of conventional ownership and lack of labor market flexibility. The TVEs exemplified the logic of commitment. The management identified with the staff since they had to provide jobs and related services to the people of the township or village, and the workers identified with the firm since that was their one chance for a good job (the Chinese government tried to prevent free mobility). The loss in allocative efficiency due to factor immobility seems to have been more than СКАЧАТЬ