Finnish business elite

1
Finnish business elite

• Tomi Oinas
• Postdoctoral researcher
• Department of social sciences and philosophy
• University of Jyväskylä

2
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

3
Background

• Classics of elite theory
• Gaetano Mosca (1858-1941)
• Vilfredo Pareto (1848-1923)
• Robert Michels (1876-1936)
• C. Wright Mills (1916-1962)

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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.

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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.
• Meisels three Cs
• Group consciousness
• Coherence
• Conspiracy i.e. common will to action

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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.

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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.

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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.

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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 indispensablethey 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
• Need for leaders, specialized staff and
  facilities
• Utilization of facilities by leaders within their
  organization
• The importance of the psychological attributes of
  the leaders

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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
• the highest political leaders and a handful of
  key cabinet members and close advisers
• major corporate owners and directors
• high ranking military officers
• These groups overlap, and elites tend to
  circulate from one sector to another,
  consolidating power as they do so

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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.
• CEOs 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."

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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.

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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

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Typology of elite structures
From Ruostetsaari 2003 From Ruostetsaari 2003 Degree of coherence Degree of coherence
From Ruostetsaari 2003 From Ruostetsaari 2003 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.
Degree of openness in recruitment High INCLUSIVE recruited from several social strata members have close contact shared social views FRAGMENTED recruited from several social strata little or no coherence
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Elites and elite structure in Finland

• According to Ruostetsaari (19922003) 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

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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

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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.

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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

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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 dont necessarily need a academic
  degree
• Business elite has the highest income on all
  elite groups

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Social background of business elite
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Attitudinal differences between elites and
population

• According to Julkunen (2001) there are three main
  reasons for differences in attitudes between
  elites and general population
• Elites have more responsibility than people on
  average
• Because elites have higher education and are more
  informed, they are better equipped to perceive
  complex phenomenon
• 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)

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Income politics should continue to strongly
emphasize equality principle in future?
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Finnish economy would function more efficiently
if it had higher income disparity?
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Finnish economy produces too great income and
welfare disparities?
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The interests of employees and employers are
nowadays mainly congruent?
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Finland should joint the EMU among the first?
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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)

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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

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Thank you!
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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).