March 09, 2016

Social Networks, Interlocking Directorates, and the Power Elite

Christopher andrewsBy Christopher Andrews

Assistant Professor of Sociology, Drew University

Social network analysis involves studying social structures through the use of networks and graphs, allowing sociologists to visualize and measure properties of the ties that connect individuals, groups, or organizations. Rooted in the formal sociology of Georg Simmel (e.g., dyads vs. triads), anthropology (e.g., kinship diagrams), social psychology (e.g., group dynamics), and mathematical sociology, social network analysis has been used to study friendship and acquaintance networks, terrorist organizations, criminal drug markets, disease transmission, and sexual relationships, just to name a few examples.

How does it work?

One way is to examine the measurable properties or metrics of a given network, including connections (e.g., number, type) as well as the way in which they are distributed (e.g., centrality, distance). For example, Stanley Milgram's (1969) "small world" experiment found that people are, on average, "six degrees of separation" from any other person, a finding that has been replicated more recently by Duncan Watts (2002) using email. Similarly, Mark Granovetter (1973) used social network analysis to learn how people find jobs; rather than through close, personal connections, he found that people tended to find information about job opportunities through acquaintances, a phenomenon he refers to as the "strength of weak ties."

Visual diagrams of social networks – or sociograms – can also be used to highlight structural properties or traits such as bridges and structural holes. Structural holes refer to gaps or the absence of a tie within a given social network, while bridges describe the way in which an individual fills a structural hole by linking two otherwise unconnected groups. Ronald Burt (2004), for example, likens structural holes to social capital; real estate agents, for example, profit from the distance created between home buyers and sellers, while car dealerships serve as middle-men between car manufacturers and consumers.

One of the more interesting applications of this method can be found at the website TheyRule.net which allows users to create interactive diagrams of companies' and organizations' board of directors. Along with some of the aforementioned studies, I also like to show students the connections that link various corporations and institutions. Given that a recent student newspaper article cited complaints with the university's food service provider, several students suggested we look at Aramark.

Partial social network diagram of Aramark's board of directors and interconnected companies; Source: TheyRule.net


As you can see, several members of Aramark's board serve on the boards of other corporations (The data on TheyRule isn't up to date and did not include two additional board members of Aramark. One of them, Richard Dreiling, I was able to find and include in the network diagram). In this case, it looks like there is some overlap in at least three relevant industries: food and beverage suppliers (e.g., Pepsi, Coca-Cola, Heinz), food storage product manufacturers (e.g., Rubbermaid), and retail chains that rely on low wage service employees and large, complex supply chains (e.g., Office Depot, JCPenney, Lowes). Several of the organizations are also large conglomerates that own dozens of subsidiaries in the food and beverage industry. Pepsi, for example, owns Gatorade, Tropicana, Lipton Tea, and Quaker Foods – all which can also be purchased in the campus dining hall.

Does this constitute some sort of malevolent corporate conspiracy? I doubt it. If Aramark is in the business of food supply and provision, one would expect the leadership of the company to have experience in the relevant industries. But it does show how interconnected boards are within specific industries, a phenomenon referred to as interlocking directorates. Does it matter that people sit together on the same boards of several companies?

The answer is it depends. In the United States, the Clayton Act prohibits interlocking directorates among companies competing in the same industry, that if combined into a single corporation would violate antitrust laws. Passed in 1914, the law was intended to curb anticompetitive practices, yet researchers have found that at least 1 in 8 of the interlocks in the United States are between corporations that are supposedly competitors.

This ability of a small group of people to control the decisions of many large institutions is what C. Wright Mills discussed in The Power Elite (1956). In this book, Mills described the way in which the "higher circles" of the government, military, and corporate America centralized power into the hands of a "power elite." Moreover, he noted that these elites frequently came from similar social backgrounds, attended similar schools, and occupied similar positions of power and authority within their respective institutions. This social similarity, he argued, led to a unity of interest that could in turn be coordinated through the interchange of persons among these higher circles (i.e., the "revolving door") or through channels of communication linking institutions, government offices, and corporations.

In this case, interlocking directorates provide opportunities for businesses in related industries to coordinate action in a way that may unfairly benefit individual corporations at the cost of consumers and competing businesses. For example, interlocking directorates among food and beverage companies might collude to charge higher prices to certain food service providers, providing better deals to companies that in turn promise more contracts.

Is this the case with Aramark? I doubt it. To begin with, there isn't an established interlocking directorate among the board members affiliated with the food and beverage industry. Moreover, only a few of Aramark's board members sit on the boards of other related companies. Instead, it seems that Aramark has a board comprised of members who have experience in relevant areas of business (e.g., food service, logistics).

On the other hand, it is probably no coincidence that a former president of Drew university also sat on the board of directors of Aramark and Pepsi Bottling Co. or that he circulated between elected office, university president, and board member of more than dozen businesses and organizations. This is precisely the sort of circulation among the "higher circles" Mills described in The Power Elite.

What about other industries? In Who Rules America (2013), G. William Domhoff finds that CitiGroup has interlocks to 25 other corporations through 13 people; two corporations – Alcoa and Comcast – share two directors with Citigroup, creating a "double interlock". The banking industry is not the only interconnected industry; researchers have also found that the four most prestigious and politically influential newspapers – the New York Times, the Los Angeles Times, the Washington Post, and the Wall Street Journal – were at one point owned by four companies while more than ninety percent of the nation's leading newspapers were linked to the business community through an interlocking board of directors.

Spend a few minutes exploring Theyrule.net and explore the connections between businesses and other organizations. Can you find examples of interlocking directorates between businesses that are supposedly competitors? How many steps or "degrees of separation" are organizations from their competitors? Likewise, you might consider examining the structural properties of the networks; what people serve as "bridges" or occupy structural holes between businesses and nonprofit organizations?

Students interested in the history of interlocks, corporations, and the power elite can find additional information at Domhoff's website which also provides links and sample assignments for instructors.

Comments

I am curious as to the possibility of a chart of interlocks between religion, government and industry. Has anyone done this?

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