Finnish business elite

Tomi OinasPostdoctoral researcher

Department of social sciences and philosophyUniversity of Jyväskylä

Introduction

• Topic:– Large scale corporations’ CEOs’ can be seen

forming part of power elite i.e. business elite– Attitudes of business elite and how they differ

from whole population

Background

• Classics of elite theory:

1. Gaetano Mosca (1858-1941)2. Vilfredo Pareto (1848-1923)3. Robert Michels (1876-1936)4. C. Wright Mills (1916-1962)

Gaetano Mosca: The Ruling Class• Every politically organized society of any degree of complexity

is characterized by the existence of an organized minority i.e. ruling class that rules and a majority that is ruled

• In different types of societies, different qualities and functions characterize the members of the ruling class

• According to Mosca the members of ruling class regularly have some attribute, that is highly esteemed and influential.

• He also adhered to the concept of the circulation of elites, which is a dialectical theory of constant competition between elites, with one elite group replacing another repeatedly over time.

Definition of Elites• The existence of elite can not be deduced from the fact that

power is concentrated in the hands of small group of people. Practically all modern societies exhibit this feature.

• The essential criterion for the existence of an elite is that it constitutes a cohesive, unitary and self-conscious group.

• Meisel´s three Cs´:1. Group consciousness2. Coherence3. Conspiracy i.e. common will to action

Vilfredo Pareto: The Theory of Elites• In society as a whole, and in any of its particular strata and

groupings, some people are more gifted than others. • Those who are most capable in any particular grouping are the

elite.• Society divided in three parts: 1) governing elite, 2) non-governing

elite and 3) none-elite• However, only in perfectly open societies (=perfect social

mobility) would elite position correlate fully with superior capacity.

• In the real world inherited wealth, family connections etc. prevent the free circulation of individuals through the ranks of society, so that those wearing an elite label and those possessing highest capacity tend to diverge to greater or lesser degrees.

Pareto: circulation of elites• When governing or non-governing elites attempt to close

themselves to the influx of newer and more capable elements from the underlying population the circulation of elites is impeded, social equilibrium is upset and the social order will decay.

• Pareto argued that if the governing elite does not find ways to assimilate the exceptional individuals who come to the front in the subject classes, an imbalance is created in the body politic and the body social until this condition is rectified, either through a new opening of channels of mobility or through violent overthrow of an old ineffectual governing elite by a new one that is capable of governing.

Pareto: lions and foxes in business• The ideal elite contains a judicious mixture of Machiavellian

“lions” and “foxes”, of men capable of decisive and forceful action and of others who are imaginative, innovative, and unscrupulous

• In economic field “speculators” and “rentiers” correspond to the foxes and lions

• The “speculators” are primarily responsible for change, for economic and social progress. They engage in large-scale financial manipulation to merge, combine, and recombine enterprises.

• The “rentiers”, instead, are a powerful element in stability, and in many cases counteracts the dangers attending the adventurous capers of the “speculators”.

Robert Michels• Developed the Iron law of oligarchy: all organizations, regardless

of whether they have a democratic constitution or agenda, in practice develop into oligarchies.

• Oligarchy develops out of a desire to be effective. The members look for leaders and organizers, these people specialize in various tasks, and their specialized knowledge and skill makes them indispensable—they can threaten resignation if the organization seems to be on the point of making a wrong decision.

• Elites have three basic principles that help in the bureaucratic structure of political organization:1. Need for leaders, specialized staff and facilities2. Utilization of facilities by leaders within their organization3. The importance of the psychological attributes of the leaders

Mills: The Power Elite• Elite are those political, economic, and military circles, which

as an intricate set of overlapping small but dominant groups share decisions having at least national consequences. Insofar as national events are decided, the power elite are those who decide them.

• The governing elite in US primarily draws its members from three areas: 1. the highest political leaders and a handful of key cabinet members

and close advisers2. major corporate owners and directors3. high ranking military officers

• These groups overlap, and elites tend to circulate from one sector to another, consolidating power as they do so

Mills: business elite

• A shift in focus of US business from regional to national markets and interests

• Transition from propertied class (owners of real assets) to a managerial class, who were able to organize the corporate enterprise into an engine for ever-expanding profits.

• CEO´s chosen because of bureaucratic skills, not because they were of the right social background.

• Could exercise national influence not only through their companies, but through the roles that they would be called upon to serve in "the national interest."

Class, Status and Elite?• According John Scott (2003) the distribution power is most

usefully analyzed along broadly Weberian lines: structures of power are organized around relations of class, status and command

• Class concerns power in the economic sphere of property and market relations, status concerns those forms of power that derive from the differentiation of groups in the sphere of culture and community.

• Command relations are organized around the distribution of authority within structures of “imperative co-ordination”. These authority relations are the basis of positions of command.

• Privileged or advantaged groups exist in each of these dimensions of power, but only those based in positions of command should be seen as elites.

Class, Status and Elite?• An elite is a social grouping whose members occupy similar

advantaged command situations and who are linked to another through circulation and interaction

• Economic elite i.e. business elite is organizational elites that arise within the authority structures of large scale economic organizations (capitalist business enterprises, employers federations, other organisations of capital)

• The connections within which the intra-organizational exercise of authority is embedded comprise personal, commercial and capital relations.

• Inter-organizational corporate elites as structure of interlocking directorships i.e. person sits on the board of two or more companies creating interlock between companies

Typology of elite structuresFrom Ruostetsaari 2003 Degree of coherence

High Low

Degree of openness in recruitment

Low EXCLUSIVE•recruited from single social stratum• members have close contact with each other• members share same opinions, attitudes and values

SEGMENTED• recruited mainly from one social stratum• members have little interaction• no shared attitudes etc.

High INCLUSIVE• recruited from several social strata• members have close contact• shared social views

FRAGMENTED• recruited from several social strata• little or no coherence

Elites and elite structure in Finland• According to Ruostetsaari (1992;2003) Finland was ruled by

unified power elite at least in the beginning of the 1990s• This group had a closed form of recruitment and differed form

the rest of population in several aspects• Different elite groups were tightly connected by institutions

(mass media, private corporations and banks) and informal personal contacts

• There was notable circulation between elite groups which increased the cohesiveness of the network

• The power elite was also attitudinally unified• In the 1990s Finland was somewhere between exclusive and

inclusive elite structure

Elites and elite structure in Finland• Results mixed on whether there still is one power elite in

Finland. • In the early 2000s there was indication of increased social

mobility in the elite groups• Also the circulation of elites had been notable• On the whole, there where only minor changes in the

cohesiveness of elite structure in Finland between 1990 and 2000

• Finland had moved somewhat nearer to the inclusive elite structure

Business elite• The business elite consists of top executives and directors of

the largest corporations. • Members of business elite have direct control over wealth-

producing property, make large-scale investments and employment decisions that determine the direction of national economy including plant location and layoff decisions

• These decisions shape regional economic situation and the life changes of individuals that work for corporations they control

• In addition, these positions are among the financially best compensated occupations. They have high salaries and, especially, the potential wealth through stock options.

Business elite as class-for-itself?• Question whether the corporate elite is capable of moving from

a class-in-itself (shared interest) into a class-for-itself (capable of acting collectively on class interests)

• Interlocks among boards of directors one of the most widely studied mechanism of intercorporate order.

• Interlocks between industrial corporations and commercial banks one of particularly significant for producing intercorporate elite.

• Intercorporate relations create mechanism promoting the capacity for unified political action among the corporate elite, including connections between banks and firms as well as an inner circle of politically active multiple directors with exposure to diverse sectors of the economy

Social background of business elite• Have clearly higher class background compared to whole

population• The background of business elite has become less “elite”. The

share of coming from top stratum has declined considerably and at the same time famer and blue collar background has become more common.

• However, high share (42%) of business elites come from families where father was upper-level employee or in leading position

• Ownership continues to be important for recruitment to the business elite. It also compensates lack of education, leaders of family businesses don´t necessarily need a academic degree

• Business elite has the highest income on all elite groups

Social background of business elite

1968 1979 1991 20010%

10%

20%

30%

40%

50%

60%

Top stratumMiddle classFarmersBlue-collar

Attitudinal differences between elites and population

• According to Julkunen (2001) there are three main reasons for differences in attitudes between elites and general population:1. Elites have more responsibility than people on average2. Because elites have higher education and are more informed, they

are better equipped to perceive complex phenomenon3. Social reforms have different affect to elites because they have high

income and are in many ways privileged • Most of these correspond especially well to the business

elite: – responsibility of costs and profits– knowledge about economy– very high income (more than doubled between 1990 and 2000)

“Income politics should continue to strongly emphasize equality principle in future?”

Agree

Dont know

Disagree

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

populationbusiness elite

“Finnish economy would function more efficiently if it had higher income disparity?”

Agree

Dont know

Disagree

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

populationbusiness elite

“Finnish economy produces too great income and welfare disparities?”

Agree

Dont know

Disagree

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

populationbusiness elite

“The interests of employees and employers are nowadays mainly congruent?”

Agree

Dont know

Disagree

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

populationbusiness elite

“Finland should joint the EMU among the first?”

Agree

Dont know

Disagree

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

populationbusiness elite

Attitudes of business elite vs. general population (1997)

• Strongest differences in attitudes of business elite and population on average are found in central social questions such as income distribution, conflicting interest of employees and employers etc.

• These differences derive partly from divergent views of optimal level of income disparity in society

• In addition, level of income seem to explain some of this difference. The higher social position, the less gap there is in attitudes compared to business elite.

• The future society desired by business elite and “masses” differ considerably!

• If there were referendum on joining EMU in Finland, the population on average would have rejected it… (cp. Sweden)

Is there a business elite in Finland?• Does the three Cs condition hold (consciousness, conspiracy

and coherence)?• There are only minor attitudinal differences inside large scale

corporations’ CEOs’ i.e. cohesion is high• Neoliberal ethos i.e. privatization and public sector downsizing

single most important unifying attitudinal dimension• Same ethos also the most important dividing factor between

business elite and general public• In representative democracy members of political elite are

selected with elections, members of business elites are not• In other words, contrary to political elite business elite is not

forced to take into consideration the public opinion

Thank you!

Literature• Pareto , V. The Mind and Society (1916)• Mosca, G. The Ruling Class (1939).• Mills, C. W. The Power Elite (1956).• Michels, R. Political Parties: A Sociological Study of the

Oligarchical Tendencies of Modern Democracy (1966).• Scott, J. Stratification and Power: Structures of Class, Status

and Domination (1996). • Scott, J. Power (2001). • Ruostetsaari, I. Vallan Ytimessä. Tutkimus suomalaisesta

valtaeliitistä (1992).• Ruostetsaari, I. Valta muutoksessa (2003).