Considering what little is
expected
of them by their superiors they are perfectly capable.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
Beyond scientists (not in Mills's power elite) telling the president of the technical possibilities, what elite led to the decision to go ahead with the Manhattan Project?
None, as far as the record shows.
If it had proved a costly failure who, besides the president, could have been blamed?
When it came to dropping the bomb on Japan, who was consulted on the pros and cons? Only President Truman figured in the decision to do it. The dropping of the bomb, like its manufacture, came as a surprise even to the corporate press. Similarly, who joined in the decision to oust General MacArthur? Only President Truman. As the saying goes, he wasn't asking anybody, he was telling them. This is, clearly, demonstrated power.
During the Cuban missile crisis many advisory voices counseled President Kennedy: Invade Cuba, bomb it, blockade it, go to the United Nations, consult foreign governments, ignore the whole business, stick to economic blockades. Most suggestions, it is clear, were ignored. One course of action was selected--by President Kennedy.
The Bay of Pigs operation, however, appears to have been a true Millsian power-elite decision (Pentagon and CIA) which the president doubtfully accepted, with a crucial modification (withdrawal of air support) that in effect scuttled the whole thing.
When it came to committing American military power openly in Vietnam in 1965 the whole idea, as far as the record shows, arose in the mind of President Johnson, who appeared to believe he could pull off an easy coup, a grandstand play that would show him a political wizard. As far as the record shows, no combined group such as Mills talks about recommended any such action, and the president in the campaign of 1964 had explicitly opposed militant action as recommended by Barry Goldwater. Key Democrats of the inner Senate Establishment, such as, Richard B. Russell of Georgia and John C. Stennis of Mississippi (elite of the elite as far as inner political power is concerned), were opposed to the procedure. Yet the president, and the president alone, gave the fateful signal that put the United States on the course toward blundering and costly slaughter and the loss of valuable friends all around the world. The operation, indeed, put the United States on all fours with Soviet Russia in its brutal suppression of the Hungarian uprising of 1956, stripped from the United States all pretensions to humane superiority over what is described on every hand as a sinister totalitarian power.
In all of Mills's collection of alleged power elite people only the big owners (what I have called the finpols) and the upper pubpols cannot be questioned, and they never were in question. While the big owners can be proceeded against with much hue and cry, investigated, chivvied, demagogically denounced or even fined, they cannot be knocked out short of revolutionary change; for their position is woven into the very warp and woof of the legal system. The upper pubpols can at most be gradually undermined in a series of electoral defeats. Even in defeat the pubpols often still have much power, like mortally wounded pythons.
This being ineluctably so, the situation is precisely where it was before Mills introduced his dazzling army of underlings. Necessary instruments of it, they are not members of the power elite although in the ruling class; they are its fringes, at most its dispensable advisers. Whatever power they have is by appointment unless they become big owners, which they may do by marriage, or win big elections. Nelson A. Rockefeller, Robert F. Kennedy, Edward Kennedy, W. Averell Harriman and a few others hold elite rank on both counts.
Members of the topmost elite are not answerable to anyone for what they do in the ordinary course of affairs. This condition eliminates the pubpols, who are ultimately answerable to the electorate and to peers. The pubpols, for example, must spend a good part of their time conspicuously entering and leaving churches; the finpols can take the churches or leave them alone, as they usually do. Nelson A. Rockefeller no doubt diminished his standing as a pubpol by his divorce and remarriage; he did not diminish himself a bit as a finpol. Nor did Henry Ford II diminish himself as a finpol by divorce and remarriage. He even weathered automatic excommunication from the Catholic Church, which a pubpol could not have done.
A finpol may be an alcoholic, a drug addict or a homosexual; a pubpol would hardly have those choices. A sybaritic finpol can swing elections; his checks are as good as those written by a puritan. A known sybaritic pubpol could not make it. The finpol, in short, has a surer and more generalized power base: money.
Finpols spend much of their time abroad, often maintain foreign residences--palazzos, ranches, plantations, haciendas, latifundias and even resort hotels. Pubpols must remain close to the home soil, with an occasional junket abroad on "fact-finding" trips. They can't even be seen at Las Vegas.
Finpols, with no dilution of their essential power, can also lead la dolce vita fully orchestrated, with a full entourage of Corybantic girls. Tendencies in this direction have been moderated of late amid tightening world tensions, as a slight concession to public sensibilities. But jollification continues here and there--in Rome, Marrakech, Monaco, Rio and St. Moritz--behind closed doors.
Best of all, the finpol cannot be toppled by elections. If one party loses out he has many pubpol friends in the other party. As long as the factories are running he is right in the swim. Reforms come and go; trimming in the back committee rooms goes on forever.
As a finpol one obviously has a surer footing.
The difference with Mills on the structure of the power elite and other details mentioned earlier does not mean that his book is without merit: Mills wrote as a moralist and a political analyst rather than as a sociologist. As a sociologist he was unable to make contact with readily available data, he did not have the underlying facts. Yet Mills, despite much shuffling with ranks and cadres of underlings, always and despite everything comes around to the paramountcy of money in the situation. He is especially mordant in his final chapter, "The Higher Immorality," where he writes:
Whenever the standards of the moneyed life prevail, the man with money, no matter how he got it, will eventually be respected. A million dollars, it is said, covers a multitude of sins. It is not only that men want money; it is that their very standards are pecuniary. In a society in which the money-maker has had no serious rival for repute and honor, the word "practical" comes to mean useful for private gain, and "common sense," the sense to get ahead financially. The pursuit of the moneyed life is the commanding value, in relation to which the influence of other values has declined, so men easily become morally ruthless in the pursuit of easy money and fast estate- building.
A great deal of American corruption--although not all of it--is simply a part of the old effort to get rich and then become richer. But today the context in which the old drive must operate has changed. When both economic and political institutions were small and scattered--as in the simpler models of classical economics and Jeffersonian democracy--no man had it in his power to bestow or to receive great favors. But when political institutions and economic opportunities are at once concentrated and linked, then public office can be used for private gain. 8
The Big Money
Just as one cannot be sure how much a man is worth by ascertaining how much stock he owns directly, so one can tell little about the true compensation of a top corporation executive by ascertaining what his salary is. It is pointless to mention specific formal salaries. There was a time when a corporation executive kept all of his generous salary. But with the introduction of the graduated income tax, cash income was eroded.
The tax laws seriously undermined the objective of purchasing the loyalty of worry- free essentially pecuniary men, and ways had to be found to make up the difference. Cash bonuses would not do because these required that the corporation expend (as the laws stood up to 1964) $100,000 for every additional $10,000 that found its way into the executive's pocket.
The two thoroughly sound ways that were found to avoid this contre-temps turned out to be cut-rate stock options, a concealed untaxed gift, and lavish expense accounts. These latter have more recently been delicately trimmed, but the stock-option plan is flourishing as never before. 9
The effect of the stock-option plan on executive take-home pay, assuming a doubling in value of the stock spread annually over a decade, was as follows in one company under the law as it stood in 1961: 10
Total Cash
Compensation
$240,000
150,000
95,000
65,000
45,000
30,000
Estimated
after-Tax
Income on
Cash
$72,000
59,000
46,000
37,000
29,000
21,000
Capital Gain
after Taxes
on Options
per Year
$144,000
79,000
43,000
26,000
14,000
5,400
After-Tax Income
Plus Capital Gain
as Percentage
of Cash
Compensation
90
92
93
97
96
85
The effective yearly executive tax in this company ranged, then, from 3 to 15 per cent, or less than the rate applicable to the lowest taxed ordinary income receiver in the country. The pecuniary advantages, direct and sub rosa, of being an upper executive are obvious.
We need not detain ourselves by reviewing untaxed expense account money, applied to some extent to entertainment and diversion and otherwise simply pocketed, or to other perquisites in the way of retirement funds and investment tips handed around among insiders on the top corporate level.
Depending on the extent of the stock-option plan and the nature of the company, this new wrinkle turned out to be the new royal road to riches in some companies. In pioneering General Motors, as we have noticed, it converted a long string of successive top executives into multi-millionaires: Raskob, Sloan, Knudsen, Mott, et al.
Stock options dilute the equities of stockholders--that is, outstanding stock is insensibly reduced in book value as blocks of stock are parceled out at cut rates. Until limitations were imposed outright, stock bonuses were popular, and in these the dilution was more plainly evident. The question now is: Do the stockholders, particularly the large stockholders, know what is taking place?
Leading stockholders always know precisely what is taking place, want to whet the acquisitive appetite of eager-beaver officers. In General Motors the Du Ponts, with a 23 per cent stake, obviously knew what was going on, acquiesced in it and possibly planned it that way. In at least one case some General Motors stockholders objected and terminated a then existing plan in court. In other companies stockholders are not at first aware of what is taking place and, when some do become aware, they may go to court to have the plans struck down, as in the 1930's in American Tobacco and Bethlehem Steel among others. In those cases a largely nonowning management had set up the plans as a way of subtly obtaining enlarged ownership of the company at bargain- counter prices.
Where some of the large hereditary owners, as in IBM among others, are executives and therefore participants in a stock-option plan, they experience less dilution of equity. The equity of the stock they already hold, true enough, is diluted but the dilution is partly or wholly compensated for by the participation in the juicy options.
Executives as Nonpecuniary Men
It is evident from the various schemes of corporate executive compensation that the acquisition of property and more property appears to be the overriding goal. One so concludes upon considering the large formal salaries, stock bonuses, stock-option plans, generous expense accounts and lucrative retirement plans, without considering various fringe benefits: long vacations, medical services, college scholarships and the like. This is all, very plainly, Easy Street in the latter-day corporate era.
And yet it has been seriously suggested that corporation executives are not really interested in money and money-making. We shall come to more items in this black-is- white mythology later, but right here seems a good place to attend to the notion that executives are not interested in making money.
1. The line, echoed in many management utterances, is stated succinctly by Osborn Elliott: ". . . the top men of U. S. industry possess the kind of drive and energy that separate the winners from the also-rans. Yet strangely enough, in a society based on the profit motive, these staunchest defenders of private profits are not themselves primarily motivated by money. Many of them, it is true, quite naturally entertain a healthy regard for the six-digit pay check. For when a man steps into a top job, his pay is likely to accelerate almost to escape velocity. "
There follows a review of some of the opulent salaries, up to Eugene Grace's $800,000 in 1956.
"Yet," Elliott resumes, "the promise of money is not what keeps most top executives coming to the office every day. For one thing, high taxes make a raise almost meaningless. . . . "
We have, though, already seen how that little impediment is bypassed.
"This is certainly the way Crawford Greenewalt [of Du Pont] feels about his own pay as president of du Pont," Elliott continues. "It is a well-known fact that on Greenewalt's wedding day in 1926, his father-in-law Ire? ne? e du Pont gave him 1,000 shares of Christiana Corp. , the holding company that owns gobs of du Pont stock. By 1959, Greenewalt owned 4,096 shares of du Pont common (at $250 a share) and 687 shares of Christiana common (at $17,000), for total holdings worth $13 million. Thus Greenewalt does not exactly depend on his $300,000-odd yearly salary and bonus from du Pont to keep body and soul together.
But Greenewalt's paycheck, Elliott admits, nevertheless has at least emotional meaning to him. He would not like to work for nothing. For, Greenewalt is quoted, "Money is a symbol in the same way that a Nobel Prize is a symbol to the scientists. You can't eat a Nobel Prize. Of course, you can eat the $50,000 that goes with it, but that's not why people want to win one. " 11 So, this strange spectacle of elaborately large pay taken in various tax-skipping forms, does have a rational if recondite explanation. It is, we are assured, purely symbolic, analogous to a Nobel Prize in science. A slight difference is that the Nobel Prize usually comes only once, cannot be solicited and is for a modest $50,000. It carries with it no stock options, gifts or retirement pay that amounts to more in one year than the average worker makes in twenty to forty years.
And the recipients of the pay, we are assured, are akin to scientists, but better paid.
Lest it be thought that I dismiss the strange contention out of hand let us prayerfully consider it together. There may be some subtle point here, as in higher mathematics, which lesser mortals have difficulty in grasping. All this money is a symbolic prize apparently for rare and profound management insight exercised to keep the infinitely complex industrial system going.
Looked at coldly, the contention in the light of all surrounding circumstances is an insult to intelligence. Comparison of year-in-year-out executive pay to the Nobel Prize compounds the insult. If the money were a mere symbol it could be hung on the wall, like a diploma. As it is, it is treasured, carefully invested, locked into the strongest vaults. If a stranger gains access to it without permission, he is liable to be shot out of hand. It is, then, more than a symbol. It is the substance, the ultimate goal.
It is entirely possible, of course, for a man to say honestly that his salary of $300,000 or so means little to him (especially when 70 or 91 per cent of it is taxable) in the light of the fact that he has other large income steadily accruing to him in dividends, undistributed profits, retirement funds, prepaid life insurance and perhaps capital gains from cut-rate stock options. Anyone might feel this way about $300,000 in such circumstances. But that this disproves an interest in money is hardly tenable. Rather could it be interpreted more reasonably as showing an interest in money that has been so well satisfied that $300,000 additional before taxes is a trifle!
Still, Osborn Elliott may be exactly correct in the letter of what he says, although he is certainly errant in rendering the essence. For he said, the close reader will note, that these men are not primarily motivated by the prospect of large gain. What primarily motivates any man might be difficult to say. Most men appear to be primarily motivated by a desire to continue breathing from moment to moment. But somewhere along the way the big money-makers, after primary motivations have been served, appear to be
grasped by a very strong, compulsive, overriding motivation to gather in large sums of money by a variety of devious avenues.
Careful studies of executive inter-company mobility, based on large numbers of companies, are inconclusive in showing a clear pull of money alone in the attraction of executives. This is in part because the effect of stock options, which became pervasive only after 1950, has not been fully studied and because the effect of hidden perquisites like wide-open expense accounts cannot be measured. But even though pre-1950 data do not clearly show the pull of bigger money 12 it is agreed by observers in the field that either money or greater responsibilities and higher positions invariably associated with money are factors. 13
Business Week in 1953 found that 422 job-changing executives gave the following reasons for moving: bigger job, more responsibility, 29. 9 per cent; greater opportunity for future growth, 21. 6 per cent; increased income, 17. 8 per cent; disagreement with management policies, 16. 1 per cent; discharged, 14. 7 per cent; need for change of activity, 10. 9 per cent; all other reasons combined, 50. 9 per cent.
As Roberts points out, on the executive circuit the first two reasons are usually associated with more money, so that in this group 69. 3 per cent of the reasons given concerned money-making. The total of reasons exceeds 100 per cent because some of the men stated more than one reason. 14 "Many similar surveys have been made and, while they differ in the weight given to individual factors, they point to a complex web of motivations in which money by itself [my emphasis--F. L. ] appears to be relatively unimportant, but in which money contributes to an unknown degree to the attractiveness of non-financial factors. " 15
All that this indicates, after tracing through the fine print, is that a salable executive will not ordinarily stay in a well-paid job if he is seriously humiliated, mistreated or frustrated and will not seek a better-paying job if it doesn't offer him at least as much security of treatment and status. But none of it suggests that executives are not attracted by better money offers. A man paid $100,000 net by Du Pont might not respond to an offer of $200,000 from Podunk Arms but, unless he saw better things in sight for him at Du Pont, he would almost certainly examine carefully an offer of $200,000 net from Allied Chemical or Union Carbide. He would, as everyone recognizes, owe it to his wife, his children, his mother, his pastor, his Alma Mater and the family dog to do at least this much.
If executives were not drawn by better money offers, despite all labored statistical analyses, such offers would not be made (and often accepted) as they commonly are. The fact that all the offers are not accepted shows the weight of the old maxim: Money isn't everything.
Yet the asserted disinterest of the high executive in money, attested to by Greenewalt of Du Pont, has achieved high academic certification, as have many other strange notions relating to wealth in the United States. Professor Daniel Bell, Columbia University sociologist, thus assures us that the new corporate men "were a special breed, often engineers, whose self-conscious task was to build a new economic form, and whose rewards were not primarily [there it is again--F. L. ] money--few accumulated the large fortunes made by a Carnegie, a Rockefeller, a Harriman, or a Ford--but status achievements and, ultimately, some independent power of their own. Thus T. N. Vail, who created American Telephone and Telegraph, Elbert Gary, who became the public relations face of U. S. Steel ('He never saw a blast furnace until he died,' said Ben Stolberg once, bitterly), Alfred P. Sloan, who fashioned the decentralized structure of General Motors, Gerard Swope, who held together General Electric, Walter Teagle,
who rationalized Standard Oil" are representatives of a new social upward mobility. 16 And this last may be true.
The big corporation man here stands forth as a status achiever, not primarily interested in money. (It has never been established, one should notice, that Carnegie, Rockefeller, Harriman, Ford or any of the progenitor moguls were primarily interested in money. For my part, I should say they were not. )
All these men--Vail, Gary, Sloan, Swope and Teagle--were agents. Behind Vail, Gary and Swope stood J. P. Morgan and Company. Behind Sloan was the Du Pont family and behind Teagle were the Rockefellers.
The only one of these to amass a very considerable fortune, thanks to stock options and a preternaturally skyrocketing large industry, was Sloan.
Professor Bell's thesis here is that family capitalism, once dominant, is breaking up, making way for the New Men of power, the new managers, who are very much akin to the members of Mills's power elite, although Bell has many well-taken critical reservations about Mills. Like Mills, he believes in the managerial revolution, in new coalitions of men not primarily interested in money (except as collectors) but interested in status, achievement and play with power. The power of the "ruling class" has been dissolved. Everything is in flux. 17
That the concrete evidence shows this has not happened--at least not yet--the reader is now well aware.
What I suggest is that the big executives, the new men, are interested in money, perhaps not primarily but prominently. I deny that ultimate power either in a company or nationally lies with the executives, unless they are also big owners.
I don't by any means suggest that the big executives are straw men, water boys. They would be of slight use to the powers-that-be if they were.
Considering what little is expected of them by their superiors they are perfectly capable. They just do not call the shots, either singly or in coalition. Their role is advisory. If, creatively, they develop large plans, these plans are subject to approval--in politics by the president and the congressional Establishment (with the concurrence of the Supreme Court) and in industry-finance by the big and few stockholders (not by the twenty million shareholders of the Stock Exchanges "People's Capitalism").
To show that what I assert is not so, all anybody has to do is to cite a single case wherein a single executive or coalition of executives, lawyers, military men or others carried out any project whatever in government against the will of the president and Congress, and in industry-finance against the will of the big owners either directly present or always ready to step in. Berle in The Modern Corporation and Private Property shows a string of big companies under management control by one legal device or other, but a few years later the managers, who were often big owners elsewhere in the economy, were knocked out by legislation and most of the companies were also knocked out of existence, especially in public utilities,
All this is so even though, as I am aware, there are cases of big owners who haven't the foggiest notion about anything until they consult the president of their company and their lawyer. They are completely dependent for guidance upon these far more knowledgeable men, who exercise power by proxy. In the circles of power, too, everybody knows for whom they speak. But I see no validity in looking upon such representatives of absentee power as "new men" of power. To me they look like old- fashioned agents, overseers, by no means to be disparaged. At the same time, they should not be enthroned--at least, not until after a coronation.
Social Origins of Executives
The origins and backgrounds of big business leaders have been studied under the most refined academic auspices and their careers statistically traced with fine-caliper methodology. 18 We may profitably take note of some of the findings.
Of the large sample studied for a period of twenty-five years, 52 per cent had fathers in business and 22 per cent had fathers in professions or white-collar work. Only 9 per cent had sires who were farmers, and 15 per cent laborers.
The fathers of 8 per cent were owners of large businesses, of 15 per cent were major executives, of 18 per cent were owners of small businesses, of 8 per cent were minor executives and of 3 per cent were foremen. 19
This finding was widely at variance with the distribution of occupations in the population as of 1920, when 47 per cent of all adult males were classified as laborers. If big business leaders had been 47 per cent the sons of laborers, the mobility rate for laborers would be 100. As it was it was only 16, while that of sons of farmers was only 40. The upward mobility rate for the sons of owners of small business was 360, of sons of professional men 350 and of sons of foremen was 133.
Most significantly, the upward mobility rate of men whose fathers were business executives or owners of large business was 775, nearly eight times the statistical projection. The sons obviously either had friends at court or got proper coaching.
As the University of Chicago sociologist W. Lloyd Warner sees it, the "royal road" to high executive success was higher education. Whereas in 1928 only somewhat more than 30 per cent of big business leaders had a college education, by 1952 the quota was nearly 60 per cent. In 1928 only 15 per cent had some college study but by 1952 20 per cent had at least been to college. 20 Of 505 business leaders as of 1952 as many as 216 went to only 14 different colleges, and these same 14 colleges were mentioned 87 times as the ones attended secondarily, either for graduate work or in transfer. Yale, Harvard, Princeton and Cornell were named most often, with Harvard as the dominant choice for graduate work. 21 Very nearly a third went to Harvard and Yale as undergraduates or graduates.
In no fewer than 62 cases the men went to a second "select" group of 10 colleges, of which Northwestern, Pennsylvania State, Stanford, Wisconsin and Western Reserve were tied for first place. 22
"Education has become the royal road to positions of power and prestige in American business and industry," says Warner. "That this royal road is open to all men is given ample testimony by the large number of educated men from the bottom social layers who appear in our sample. " 23
That this royal road, so optimistically saluted, may not in fact be such is suggested by the continuing merger movement and the steady progress of computer analysis. Decision making, whatever its role in the past, is inevitably being narrowed in scope by the increasing refinement and elaboration of computers; live decision makers, whatever their role in the past, are becoming increasingly dispensable. Furthermore, the merger movement is continually reducing the number of top executive posts. Every merger, while it does not necessarily reduce the total of vice presidents and executive vice presidents, does reduce the number of chairmen and presidents. If all companies were combined into a single company there would be places for only one chairman and one president, and at most twenty-five members of the board.
That education is not the true gateway to the "royal road" is shown by the concentration of elite schools, long the special wards of the propertied. These schools,
eclipsing others, produced most executives because they were most patronized by the upper classes. In view of the fact that sons of members of the business elite, owners or big executives, were disproportionately represented and showed the highest index of upward corporate mobility, it would appear that belonging to the business in-group and the socially related professional group was a more significant factor than level or place of schooling in obtaining big-business position. Sons of owners, executives and professionals as a matter of course are more likely to go on to college, particularly to elite colleges, and after that into the higher executive posts. True, as Warner shows, men of lower social origins can and do make the grade, but in far lesser proportion than the incidence of low social origin in the population. Otherwise put, those who are already in at the beginning are more likely to be in at the final reckoning.
The typical business leader of the 1950's was 54 years old, had been with his firm 24 years, achieved his high position 24 years after entering business and had held his job for almost 7 years. Most men began business between age 21 and 22, freely shifted jobs and companies until about 29 years old when they joined their permanent firms. Typically, the man was 45 or 46 years old when he clearly emerged as a top dog. 24
But the longer his period of schooling the quicker he made it to the top. Graduate students made the very top in 19. 9 years, college graduates in 22. 9 years, college dropouts in 24. 5 years, high school graduates in 27. 9 years, high school dropouts in 30. 6 years and grade school products in 31 years. 25
So, the more schooling the successful entrants have (or the more affluent early circumstances) the quicker they make it to the top. At any rate, neither education nor in- group standing retard one in his ascent.
In beginning occupations, 43 per cent started as clerks and salesmen, 24 per cent as professionals, only 14 per cent as skilled or unskilled laborers. "Few at any point in their careers were entrepreneurs in the sense of owning or establishing their own businesses. Also, while there have been a number of cases of men moving from top-level military positions into key positions of late, these form only a minor proportion of the total business elite. " 26 So much for Mills's switchovers from the military to the corporate circuits.
The Horatio Alger hero, as Warner notes, is not very much in evidence.
"Careers are built largely on formal education, acquisition of management skills in the white-collar hierarchy, and movement through the far-flung systems of technicians and lower-level management personnel into top management. Traces of the legendary patterns remain, and spectacular examples of the type exist; they tend to be unique. " 27
Upward mobility toward the elite corporate level, Warner found, was especially marked in the area of marriage because most business leaders in all categories married above or below their levels of origin. Those of laborer origin married most frequently at their level of origin, 42 per cent; big-business people married next most frequently at their level of origin, 35 per cent. Professionals and white-collar people, exogamous at 77 and 81 per cent respectively, married most frequently outside their levels of origin, but nearly 20 per cent in both these cases married into the big-business class, took to wife a tycoon's daughter.
When a man marries above or below level of origin--and most of all categories did-- there is upward social mobility toward corporate elite status involved in marriage for the man or the woman. As the leaders all have elite status, it matters not how they got it, although women born below the elite obviously got there only through marriage. A woman is either in the elite to begin with, marries into it or marries a man who drags her along into it. 28
People who make it to the top or are born into the top are mobile in non-social ways. They are, first, geographically mobile, easily moving around the country from place to place. They are functionally mobile, readily adapting to a considerable range of jobs in which Warner detects much special educational stimulus; they are adaptable men. Those in the birth elite, however, tend to be less conspicuously geographical gadabouts.
External signs of steadiness and "stability" were most noticeable in the birth elite. The others, at least early in their careers, were more akin to rolling stones, willing to switch jobs and locations.
The number of men in the same firm as their fathers, compared with sons of the elite who achieve high position in other business organizations, is relatively small. There can be no doubt that each group of men was advantaged by being born to high estate. Only a few were directly aided by extra privileges and financial assistance; but the immediate factor of being born to families accorded high rank by the community provides such fortunate men with social and economic advantages, such as being in the higher levels of prestige where the powerful are, going to the "right" preparatory schools, having the right social relations and clubs and fraternities in college, and going with and courting young women of their own social set, knowing what to do and not to do (while the parvenu by trial and error is struggling to learn that there are such ways). They get a head start in life that can be overcome only by hard work, grim determination, and watchfulness of personnel offices, or the eager quest of great corporations for young men of promise. The birth elite are advantaged because their families learn "superior" values, goals, and standards by living in the subculture of an upper class. Their earliest adaptations from infancy on--nursing, weaning, cleanliness, likes and dislikes, admiration or dislike of intimate figures about them, later childhood goals and ambitions--are set within the learning maze of a "Superior" family. 29
It may be hypothesized that there are far more heart attacks among the nonelite upward strivers than in the birth elite: the Horatio Alger boys who never made it, dropped dead on the ten-yard line. I have found no studies of fatal illness in the candidates for success on the corporate ladder that compare the rate of such illness for groups of different social origin. One may surmise, however, that the man who makes it from laborer to retirement as chairman of the board has an exceptionally strong constitution. The road ahead somehow seems less rough with Scarsdale, Yale and Skull and Bones as take-off points.
Life around the Executive Suite
Life in the corporations, and in and around the executive suite, has been as closely studied as other phases of the executive terrain and has often been portrayed in best- selling novels and popular films. William Whyte's The Organization Man is one of the better known of the more mordant studies of the corporate bureaucracy and its foibles, and there are others. But for an impressionistic study of the headquarters office of the large finpolity there is nothing to excel Alan Harrington's Life in the Crystal Palace, written by one of its Harvardian denizens. Grimly forbidding to the Socialist, Communist and more generalized radical, the organizational generating point of human exploitation and debasement, the corporation on the inside is indeed nothing so much as a crystal palace, a place of shining light, elevated attitude and sweet benignity. "I think that our company resembles nothing so much as a private socialist system," says Harrington. 30
The whole of his book is a banteringly persuasive, penetrating embroidery on this theme.
What Marx suggested socialism might be like after it took over an irrational capitalism from a handful of selfish owners one finds here--at the headquarters of the
giant corporation. Here the byword is: From each according to his capacity without any great pressure, to each according to his needs in an ascending hierarchy of greater and greater privileges, boons and opportunities. Harsh voices are never heard in the Crystal Palace, nobody is ever bawled out, nobody is ever fired no matter how much he deserves it, everything is cushioned--benefits all around for everybody from day of employment until death.
"A mighty fortress is our Palace; I will not want for anything. I may live my days without humiliation. I will not be fired. It nourishes my self-respect. I am led along the paths of righteousness for my own good. I am protected from tyrants. It guards me against tension and fragmentation of myself. It anoints me with benefits. Though we pass through bard times, I will be preserved. These strong walls will surely embrace all the days of my life, if I remain a corporation man forever. " 31
And all this applies down to the lowliest clerk and office boy of the Crystal Palace, each of whom has in hand his plan of sure benefits until retirement and beyond. Everything is bland, bland, bland . . . and genteel, subdued.
But "As for the young man who has not gone to college, he is virtually untouchable so far as a middle-level job with a corporation is concerned. If Henry Ford were reincarnated he could never land a job at the Crystal Palace. In fact, on the technical side, an applicant will have quite a bit of selling to do if he can't produce a graduate school degree. " 32
"I suspect," says Harrington, "that most jobs in a corporation and elsewhere can be mastered in a few months, or at any rate in a year or two. What cannot be learned that quickly is the corporation minuet--the respectful dance with the right partners. The watchful corporation man gradually finds out who is important and who is not; what is acceptable and what is not; what type of project will advance his fortunes and what is not worth bothering about. The secrets of gauging and responding to the power of others--superimposed on a normal intelligence--will move him slowly upward. " 33
In the upshot Harrington found paradise boring. The hardest task was standing quietly on the escalator as it quietly swept one upwards toward the quiet stratosphere of quiet corporate power.
There was one cardinal sin at the Crystal Palace, Harrington found, and it could get one into serious difficulty. This was to be without the capacity for belief in the absurd, at least for believing in believing. Not to be a true believer of some acceptable sort stamped one as dangerous. As Harrington saw it, the hierarchy of acceptable beliefs from highest to lowest was as follows:
1. Belief in the product. "The highest and most satisfying form of commercial belief is the conviction that the product I am working for is essential, or at least helpful, to mankind. If I can't have that, I should be able to assume, at any rate, that our product is the best of its kind on the market. Lacking that, let me have faith that it is not positively the worst of its kind. Take even that away, and please assure me that it is not poisonous. Without such assurance, I will have to justify my job in another way. " The product, in short, is making the world a better place, at least not worse.
2. Belief in making money. "Money . . . measures the length and strength of my manhood. It is the skin of the dangerous leopard, the bacon from the wily pig that I bring home because I am strong, and know my way around the forest. . . . The possession of money makes men more masculine and women more feminine. Cash enlarges the soul. Money creates beauty where there was none before. It is positively erotic and can buy gaiety. When I have money I am a much nicer person, tolerant, kind
and understanding, and I forgive the sins of others. . . . " Moneymakers are great people, the greatest.
3. Belief in getting ahead. Attainment of status is the end in view here. You are what people think of you.
4. Belief in being a "pro" in doing a job professionally well whether one likes the job or not.
5. Belief in sheer process. "I believe in production. "
6. Belief in the company, whatever one's lack of belief in any of the foregoing. Not at the very least to believe in the company disqualifies one entirely.
For if I am lost in the split-level values of modern business, the High Corporation will serve as my High Church. Like the church, my Crystal Palace removes the burden of belief from me. It removes my need for decision. I have found my rock. I only believe in the company.
Like the church, our company is good and wise. In the context of business enterprise, it is the inheritor and vessel of a mighty tradition. Our company has achieved high ethics and kindness, and cares for me, and will see me through to sixty-five, and send me checks after that. Church and Palace alike are sanctuaries in the jungle of unbridled competition. At the head of the church is God. On the top floor of the Crystal Palace . . . it doesn't matter, since I will never arrive there. 34
The Big Money
The plush fortunes, few excepted, belong almost entirely to original owners of properties, mainly in the form of corporations, or their descendants. Leading executives, no matter how much they are paid, rarely put together overarching estates.
The way one becomes ultra-rich on the corporate circuit is to gain an early ownership participation in a rapidly developing company (preferably unnoticed) in a new field, precisely as in the nineteenth century. The trick is to see the new field opening up or to open it up. Most nonowner executives, as we have seen, make it to the top at about forty-five years of age, with only some twenty years to go before mandatory retirement. Even if they were able to put aside as much as $1 million a year out of cash salary, stock options and participation in undistributed profits this would guarantee only $20 million prior to retirement, not a pauper's portion by any means but still not up in the imperial range of the General Motors executives between 1920 and 1960 nor in the range of the $90-million estate left by Arthur Vining Davis of Alcoa.
In order to get into the really top money an executive must have taken his top position very early, which means that except in the case of an hereditary owner it must certainly have been a small or smallish little-known company when he took his position. Thereafter his fortunes became those of the burgeoning company; as a member of the inner family he becomes rich enough to arouse widespread envy.
Not many big new companies have emerged since 1920. Running down the Fortune list of the first hundred industrials we find International Business Machines, North American Aviation, Boeing, Radio Corporation, General Telephone, General Dynamics, Sperry Rand, United Aircraft, Allied Chemical, Minnesota Mining and Manufacturing, McDonnell Aircraft, Olin Mathieson, Textron, Celanese, Litton Industries, Douglas Aircraft, Reynolds Metals, Grumman Aircraft and United Merchants and Manufacturers. Even some of these embrace, through mergers, properties extant before 1920; most of them, however, are representative of new technology, mainly aviation, electronics and chemicals, and have been well served by war. Some started out rather big. It is in companies such as these that early executives who remain for many years
turn up with estates that are large but seldom within hailing distance of the big established fortunes multiply distributed among many family members. In this collection no fortunes have been produced to compare with the stupendous accumulations of Henry Ford and the General Motors crowd.
A rather fruitless running debate takes place desultorily between those who assert that the American economy is so developed that nobody can any longer scrape together a big fortune and those who claim there are as many opportunities for fortune-builders as ever. That there are lush opportunities cannot be denied. But that, in view of the great increase in population and the solidly established titles of hereditary wealth, the opportunities are nearly so many as once was the case is extremely doubtful. Concentration alone limits opportunities for financial devilment by newcomers.
While new technology does lift new men to positions of wealth, it should not be forgotten that old wealth-holders are usually careful to see that they are participants in the new technology. Thus, while the development of Polaroid made newcomer Dr. Edwin H. Land a very wealthy man--one of the few really wealthy inventors--he was in partnership with Harriman and Warburg money.
Corporation executives are the most highly consistently paid people in the American economy. If salary is a symbol of worth, as commonly supposed, they are the most worthwhile people in American society. In general, pay for administering large properties or organizations exceeds all other types of recurrent pay. The pay of top executives even in nonprofit organizations, such as foundations and national trade unions, also tends to be high, in the range at least of $50,000 to $100,000.
The most systematically, subtly and thoroughly trained people in the country, it will be generally agreed, are the scientists. Yet the median annual salary of 223,854 registered scientists in 1964 was only $11,000 a year, about the expense account of a middle-level salesman.
When it came to dropping the bomb on Japan, who was consulted on the pros and cons? Only President Truman figured in the decision to do it. The dropping of the bomb, like its manufacture, came as a surprise even to the corporate press. Similarly, who joined in the decision to oust General MacArthur? Only President Truman. As the saying goes, he wasn't asking anybody, he was telling them. This is, clearly, demonstrated power.
During the Cuban missile crisis many advisory voices counseled President Kennedy: Invade Cuba, bomb it, blockade it, go to the United Nations, consult foreign governments, ignore the whole business, stick to economic blockades. Most suggestions, it is clear, were ignored. One course of action was selected--by President Kennedy.
The Bay of Pigs operation, however, appears to have been a true Millsian power-elite decision (Pentagon and CIA) which the president doubtfully accepted, with a crucial modification (withdrawal of air support) that in effect scuttled the whole thing.
When it came to committing American military power openly in Vietnam in 1965 the whole idea, as far as the record shows, arose in the mind of President Johnson, who appeared to believe he could pull off an easy coup, a grandstand play that would show him a political wizard. As far as the record shows, no combined group such as Mills talks about recommended any such action, and the president in the campaign of 1964 had explicitly opposed militant action as recommended by Barry Goldwater. Key Democrats of the inner Senate Establishment, such as, Richard B. Russell of Georgia and John C. Stennis of Mississippi (elite of the elite as far as inner political power is concerned), were opposed to the procedure. Yet the president, and the president alone, gave the fateful signal that put the United States on the course toward blundering and costly slaughter and the loss of valuable friends all around the world. The operation, indeed, put the United States on all fours with Soviet Russia in its brutal suppression of the Hungarian uprising of 1956, stripped from the United States all pretensions to humane superiority over what is described on every hand as a sinister totalitarian power.
In all of Mills's collection of alleged power elite people only the big owners (what I have called the finpols) and the upper pubpols cannot be questioned, and they never were in question. While the big owners can be proceeded against with much hue and cry, investigated, chivvied, demagogically denounced or even fined, they cannot be knocked out short of revolutionary change; for their position is woven into the very warp and woof of the legal system. The upper pubpols can at most be gradually undermined in a series of electoral defeats. Even in defeat the pubpols often still have much power, like mortally wounded pythons.
This being ineluctably so, the situation is precisely where it was before Mills introduced his dazzling army of underlings. Necessary instruments of it, they are not members of the power elite although in the ruling class; they are its fringes, at most its dispensable advisers. Whatever power they have is by appointment unless they become big owners, which they may do by marriage, or win big elections. Nelson A. Rockefeller, Robert F. Kennedy, Edward Kennedy, W. Averell Harriman and a few others hold elite rank on both counts.
Members of the topmost elite are not answerable to anyone for what they do in the ordinary course of affairs. This condition eliminates the pubpols, who are ultimately answerable to the electorate and to peers. The pubpols, for example, must spend a good part of their time conspicuously entering and leaving churches; the finpols can take the churches or leave them alone, as they usually do. Nelson A. Rockefeller no doubt diminished his standing as a pubpol by his divorce and remarriage; he did not diminish himself a bit as a finpol. Nor did Henry Ford II diminish himself as a finpol by divorce and remarriage. He even weathered automatic excommunication from the Catholic Church, which a pubpol could not have done.
A finpol may be an alcoholic, a drug addict or a homosexual; a pubpol would hardly have those choices. A sybaritic finpol can swing elections; his checks are as good as those written by a puritan. A known sybaritic pubpol could not make it. The finpol, in short, has a surer and more generalized power base: money.
Finpols spend much of their time abroad, often maintain foreign residences--palazzos, ranches, plantations, haciendas, latifundias and even resort hotels. Pubpols must remain close to the home soil, with an occasional junket abroad on "fact-finding" trips. They can't even be seen at Las Vegas.
Finpols, with no dilution of their essential power, can also lead la dolce vita fully orchestrated, with a full entourage of Corybantic girls. Tendencies in this direction have been moderated of late amid tightening world tensions, as a slight concession to public sensibilities. But jollification continues here and there--in Rome, Marrakech, Monaco, Rio and St. Moritz--behind closed doors.
Best of all, the finpol cannot be toppled by elections. If one party loses out he has many pubpol friends in the other party. As long as the factories are running he is right in the swim. Reforms come and go; trimming in the back committee rooms goes on forever.
As a finpol one obviously has a surer footing.
The difference with Mills on the structure of the power elite and other details mentioned earlier does not mean that his book is without merit: Mills wrote as a moralist and a political analyst rather than as a sociologist. As a sociologist he was unable to make contact with readily available data, he did not have the underlying facts. Yet Mills, despite much shuffling with ranks and cadres of underlings, always and despite everything comes around to the paramountcy of money in the situation. He is especially mordant in his final chapter, "The Higher Immorality," where he writes:
Whenever the standards of the moneyed life prevail, the man with money, no matter how he got it, will eventually be respected. A million dollars, it is said, covers a multitude of sins. It is not only that men want money; it is that their very standards are pecuniary. In a society in which the money-maker has had no serious rival for repute and honor, the word "practical" comes to mean useful for private gain, and "common sense," the sense to get ahead financially. The pursuit of the moneyed life is the commanding value, in relation to which the influence of other values has declined, so men easily become morally ruthless in the pursuit of easy money and fast estate- building.
A great deal of American corruption--although not all of it--is simply a part of the old effort to get rich and then become richer. But today the context in which the old drive must operate has changed. When both economic and political institutions were small and scattered--as in the simpler models of classical economics and Jeffersonian democracy--no man had it in his power to bestow or to receive great favors. But when political institutions and economic opportunities are at once concentrated and linked, then public office can be used for private gain. 8
The Big Money
Just as one cannot be sure how much a man is worth by ascertaining how much stock he owns directly, so one can tell little about the true compensation of a top corporation executive by ascertaining what his salary is. It is pointless to mention specific formal salaries. There was a time when a corporation executive kept all of his generous salary. But with the introduction of the graduated income tax, cash income was eroded.
The tax laws seriously undermined the objective of purchasing the loyalty of worry- free essentially pecuniary men, and ways had to be found to make up the difference. Cash bonuses would not do because these required that the corporation expend (as the laws stood up to 1964) $100,000 for every additional $10,000 that found its way into the executive's pocket.
The two thoroughly sound ways that were found to avoid this contre-temps turned out to be cut-rate stock options, a concealed untaxed gift, and lavish expense accounts. These latter have more recently been delicately trimmed, but the stock-option plan is flourishing as never before. 9
The effect of the stock-option plan on executive take-home pay, assuming a doubling in value of the stock spread annually over a decade, was as follows in one company under the law as it stood in 1961: 10
Total Cash
Compensation
$240,000
150,000
95,000
65,000
45,000
30,000
Estimated
after-Tax
Income on
Cash
$72,000
59,000
46,000
37,000
29,000
21,000
Capital Gain
after Taxes
on Options
per Year
$144,000
79,000
43,000
26,000
14,000
5,400
After-Tax Income
Plus Capital Gain
as Percentage
of Cash
Compensation
90
92
93
97
96
85
The effective yearly executive tax in this company ranged, then, from 3 to 15 per cent, or less than the rate applicable to the lowest taxed ordinary income receiver in the country. The pecuniary advantages, direct and sub rosa, of being an upper executive are obvious.
We need not detain ourselves by reviewing untaxed expense account money, applied to some extent to entertainment and diversion and otherwise simply pocketed, or to other perquisites in the way of retirement funds and investment tips handed around among insiders on the top corporate level.
Depending on the extent of the stock-option plan and the nature of the company, this new wrinkle turned out to be the new royal road to riches in some companies. In pioneering General Motors, as we have noticed, it converted a long string of successive top executives into multi-millionaires: Raskob, Sloan, Knudsen, Mott, et al.
Stock options dilute the equities of stockholders--that is, outstanding stock is insensibly reduced in book value as blocks of stock are parceled out at cut rates. Until limitations were imposed outright, stock bonuses were popular, and in these the dilution was more plainly evident. The question now is: Do the stockholders, particularly the large stockholders, know what is taking place?
Leading stockholders always know precisely what is taking place, want to whet the acquisitive appetite of eager-beaver officers. In General Motors the Du Ponts, with a 23 per cent stake, obviously knew what was going on, acquiesced in it and possibly planned it that way. In at least one case some General Motors stockholders objected and terminated a then existing plan in court. In other companies stockholders are not at first aware of what is taking place and, when some do become aware, they may go to court to have the plans struck down, as in the 1930's in American Tobacco and Bethlehem Steel among others. In those cases a largely nonowning management had set up the plans as a way of subtly obtaining enlarged ownership of the company at bargain- counter prices.
Where some of the large hereditary owners, as in IBM among others, are executives and therefore participants in a stock-option plan, they experience less dilution of equity. The equity of the stock they already hold, true enough, is diluted but the dilution is partly or wholly compensated for by the participation in the juicy options.
Executives as Nonpecuniary Men
It is evident from the various schemes of corporate executive compensation that the acquisition of property and more property appears to be the overriding goal. One so concludes upon considering the large formal salaries, stock bonuses, stock-option plans, generous expense accounts and lucrative retirement plans, without considering various fringe benefits: long vacations, medical services, college scholarships and the like. This is all, very plainly, Easy Street in the latter-day corporate era.
And yet it has been seriously suggested that corporation executives are not really interested in money and money-making. We shall come to more items in this black-is- white mythology later, but right here seems a good place to attend to the notion that executives are not interested in making money.
1. The line, echoed in many management utterances, is stated succinctly by Osborn Elliott: ". . . the top men of U. S. industry possess the kind of drive and energy that separate the winners from the also-rans. Yet strangely enough, in a society based on the profit motive, these staunchest defenders of private profits are not themselves primarily motivated by money. Many of them, it is true, quite naturally entertain a healthy regard for the six-digit pay check. For when a man steps into a top job, his pay is likely to accelerate almost to escape velocity. "
There follows a review of some of the opulent salaries, up to Eugene Grace's $800,000 in 1956.
"Yet," Elliott resumes, "the promise of money is not what keeps most top executives coming to the office every day. For one thing, high taxes make a raise almost meaningless. . . . "
We have, though, already seen how that little impediment is bypassed.
"This is certainly the way Crawford Greenewalt [of Du Pont] feels about his own pay as president of du Pont," Elliott continues. "It is a well-known fact that on Greenewalt's wedding day in 1926, his father-in-law Ire? ne? e du Pont gave him 1,000 shares of Christiana Corp. , the holding company that owns gobs of du Pont stock. By 1959, Greenewalt owned 4,096 shares of du Pont common (at $250 a share) and 687 shares of Christiana common (at $17,000), for total holdings worth $13 million. Thus Greenewalt does not exactly depend on his $300,000-odd yearly salary and bonus from du Pont to keep body and soul together.
But Greenewalt's paycheck, Elliott admits, nevertheless has at least emotional meaning to him. He would not like to work for nothing. For, Greenewalt is quoted, "Money is a symbol in the same way that a Nobel Prize is a symbol to the scientists. You can't eat a Nobel Prize. Of course, you can eat the $50,000 that goes with it, but that's not why people want to win one. " 11 So, this strange spectacle of elaborately large pay taken in various tax-skipping forms, does have a rational if recondite explanation. It is, we are assured, purely symbolic, analogous to a Nobel Prize in science. A slight difference is that the Nobel Prize usually comes only once, cannot be solicited and is for a modest $50,000. It carries with it no stock options, gifts or retirement pay that amounts to more in one year than the average worker makes in twenty to forty years.
And the recipients of the pay, we are assured, are akin to scientists, but better paid.
Lest it be thought that I dismiss the strange contention out of hand let us prayerfully consider it together. There may be some subtle point here, as in higher mathematics, which lesser mortals have difficulty in grasping. All this money is a symbolic prize apparently for rare and profound management insight exercised to keep the infinitely complex industrial system going.
Looked at coldly, the contention in the light of all surrounding circumstances is an insult to intelligence. Comparison of year-in-year-out executive pay to the Nobel Prize compounds the insult. If the money were a mere symbol it could be hung on the wall, like a diploma. As it is, it is treasured, carefully invested, locked into the strongest vaults. If a stranger gains access to it without permission, he is liable to be shot out of hand. It is, then, more than a symbol. It is the substance, the ultimate goal.
It is entirely possible, of course, for a man to say honestly that his salary of $300,000 or so means little to him (especially when 70 or 91 per cent of it is taxable) in the light of the fact that he has other large income steadily accruing to him in dividends, undistributed profits, retirement funds, prepaid life insurance and perhaps capital gains from cut-rate stock options. Anyone might feel this way about $300,000 in such circumstances. But that this disproves an interest in money is hardly tenable. Rather could it be interpreted more reasonably as showing an interest in money that has been so well satisfied that $300,000 additional before taxes is a trifle!
Still, Osborn Elliott may be exactly correct in the letter of what he says, although he is certainly errant in rendering the essence. For he said, the close reader will note, that these men are not primarily motivated by the prospect of large gain. What primarily motivates any man might be difficult to say. Most men appear to be primarily motivated by a desire to continue breathing from moment to moment. But somewhere along the way the big money-makers, after primary motivations have been served, appear to be
grasped by a very strong, compulsive, overriding motivation to gather in large sums of money by a variety of devious avenues.
Careful studies of executive inter-company mobility, based on large numbers of companies, are inconclusive in showing a clear pull of money alone in the attraction of executives. This is in part because the effect of stock options, which became pervasive only after 1950, has not been fully studied and because the effect of hidden perquisites like wide-open expense accounts cannot be measured. But even though pre-1950 data do not clearly show the pull of bigger money 12 it is agreed by observers in the field that either money or greater responsibilities and higher positions invariably associated with money are factors. 13
Business Week in 1953 found that 422 job-changing executives gave the following reasons for moving: bigger job, more responsibility, 29. 9 per cent; greater opportunity for future growth, 21. 6 per cent; increased income, 17. 8 per cent; disagreement with management policies, 16. 1 per cent; discharged, 14. 7 per cent; need for change of activity, 10. 9 per cent; all other reasons combined, 50. 9 per cent.
As Roberts points out, on the executive circuit the first two reasons are usually associated with more money, so that in this group 69. 3 per cent of the reasons given concerned money-making. The total of reasons exceeds 100 per cent because some of the men stated more than one reason. 14 "Many similar surveys have been made and, while they differ in the weight given to individual factors, they point to a complex web of motivations in which money by itself [my emphasis--F. L. ] appears to be relatively unimportant, but in which money contributes to an unknown degree to the attractiveness of non-financial factors. " 15
All that this indicates, after tracing through the fine print, is that a salable executive will not ordinarily stay in a well-paid job if he is seriously humiliated, mistreated or frustrated and will not seek a better-paying job if it doesn't offer him at least as much security of treatment and status. But none of it suggests that executives are not attracted by better money offers. A man paid $100,000 net by Du Pont might not respond to an offer of $200,000 from Podunk Arms but, unless he saw better things in sight for him at Du Pont, he would almost certainly examine carefully an offer of $200,000 net from Allied Chemical or Union Carbide. He would, as everyone recognizes, owe it to his wife, his children, his mother, his pastor, his Alma Mater and the family dog to do at least this much.
If executives were not drawn by better money offers, despite all labored statistical analyses, such offers would not be made (and often accepted) as they commonly are. The fact that all the offers are not accepted shows the weight of the old maxim: Money isn't everything.
Yet the asserted disinterest of the high executive in money, attested to by Greenewalt of Du Pont, has achieved high academic certification, as have many other strange notions relating to wealth in the United States. Professor Daniel Bell, Columbia University sociologist, thus assures us that the new corporate men "were a special breed, often engineers, whose self-conscious task was to build a new economic form, and whose rewards were not primarily [there it is again--F. L. ] money--few accumulated the large fortunes made by a Carnegie, a Rockefeller, a Harriman, or a Ford--but status achievements and, ultimately, some independent power of their own. Thus T. N. Vail, who created American Telephone and Telegraph, Elbert Gary, who became the public relations face of U. S. Steel ('He never saw a blast furnace until he died,' said Ben Stolberg once, bitterly), Alfred P. Sloan, who fashioned the decentralized structure of General Motors, Gerard Swope, who held together General Electric, Walter Teagle,
who rationalized Standard Oil" are representatives of a new social upward mobility. 16 And this last may be true.
The big corporation man here stands forth as a status achiever, not primarily interested in money. (It has never been established, one should notice, that Carnegie, Rockefeller, Harriman, Ford or any of the progenitor moguls were primarily interested in money. For my part, I should say they were not. )
All these men--Vail, Gary, Sloan, Swope and Teagle--were agents. Behind Vail, Gary and Swope stood J. P. Morgan and Company. Behind Sloan was the Du Pont family and behind Teagle were the Rockefellers.
The only one of these to amass a very considerable fortune, thanks to stock options and a preternaturally skyrocketing large industry, was Sloan.
Professor Bell's thesis here is that family capitalism, once dominant, is breaking up, making way for the New Men of power, the new managers, who are very much akin to the members of Mills's power elite, although Bell has many well-taken critical reservations about Mills. Like Mills, he believes in the managerial revolution, in new coalitions of men not primarily interested in money (except as collectors) but interested in status, achievement and play with power. The power of the "ruling class" has been dissolved. Everything is in flux. 17
That the concrete evidence shows this has not happened--at least not yet--the reader is now well aware.
What I suggest is that the big executives, the new men, are interested in money, perhaps not primarily but prominently. I deny that ultimate power either in a company or nationally lies with the executives, unless they are also big owners.
I don't by any means suggest that the big executives are straw men, water boys. They would be of slight use to the powers-that-be if they were.
Considering what little is expected of them by their superiors they are perfectly capable. They just do not call the shots, either singly or in coalition. Their role is advisory. If, creatively, they develop large plans, these plans are subject to approval--in politics by the president and the congressional Establishment (with the concurrence of the Supreme Court) and in industry-finance by the big and few stockholders (not by the twenty million shareholders of the Stock Exchanges "People's Capitalism").
To show that what I assert is not so, all anybody has to do is to cite a single case wherein a single executive or coalition of executives, lawyers, military men or others carried out any project whatever in government against the will of the president and Congress, and in industry-finance against the will of the big owners either directly present or always ready to step in. Berle in The Modern Corporation and Private Property shows a string of big companies under management control by one legal device or other, but a few years later the managers, who were often big owners elsewhere in the economy, were knocked out by legislation and most of the companies were also knocked out of existence, especially in public utilities,
All this is so even though, as I am aware, there are cases of big owners who haven't the foggiest notion about anything until they consult the president of their company and their lawyer. They are completely dependent for guidance upon these far more knowledgeable men, who exercise power by proxy. In the circles of power, too, everybody knows for whom they speak. But I see no validity in looking upon such representatives of absentee power as "new men" of power. To me they look like old- fashioned agents, overseers, by no means to be disparaged. At the same time, they should not be enthroned--at least, not until after a coronation.
Social Origins of Executives
The origins and backgrounds of big business leaders have been studied under the most refined academic auspices and their careers statistically traced with fine-caliper methodology. 18 We may profitably take note of some of the findings.
Of the large sample studied for a period of twenty-five years, 52 per cent had fathers in business and 22 per cent had fathers in professions or white-collar work. Only 9 per cent had sires who were farmers, and 15 per cent laborers.
The fathers of 8 per cent were owners of large businesses, of 15 per cent were major executives, of 18 per cent were owners of small businesses, of 8 per cent were minor executives and of 3 per cent were foremen. 19
This finding was widely at variance with the distribution of occupations in the population as of 1920, when 47 per cent of all adult males were classified as laborers. If big business leaders had been 47 per cent the sons of laborers, the mobility rate for laborers would be 100. As it was it was only 16, while that of sons of farmers was only 40. The upward mobility rate for the sons of owners of small business was 360, of sons of professional men 350 and of sons of foremen was 133.
Most significantly, the upward mobility rate of men whose fathers were business executives or owners of large business was 775, nearly eight times the statistical projection. The sons obviously either had friends at court or got proper coaching.
As the University of Chicago sociologist W. Lloyd Warner sees it, the "royal road" to high executive success was higher education. Whereas in 1928 only somewhat more than 30 per cent of big business leaders had a college education, by 1952 the quota was nearly 60 per cent. In 1928 only 15 per cent had some college study but by 1952 20 per cent had at least been to college. 20 Of 505 business leaders as of 1952 as many as 216 went to only 14 different colleges, and these same 14 colleges were mentioned 87 times as the ones attended secondarily, either for graduate work or in transfer. Yale, Harvard, Princeton and Cornell were named most often, with Harvard as the dominant choice for graduate work. 21 Very nearly a third went to Harvard and Yale as undergraduates or graduates.
In no fewer than 62 cases the men went to a second "select" group of 10 colleges, of which Northwestern, Pennsylvania State, Stanford, Wisconsin and Western Reserve were tied for first place. 22
"Education has become the royal road to positions of power and prestige in American business and industry," says Warner. "That this royal road is open to all men is given ample testimony by the large number of educated men from the bottom social layers who appear in our sample. " 23
That this royal road, so optimistically saluted, may not in fact be such is suggested by the continuing merger movement and the steady progress of computer analysis. Decision making, whatever its role in the past, is inevitably being narrowed in scope by the increasing refinement and elaboration of computers; live decision makers, whatever their role in the past, are becoming increasingly dispensable. Furthermore, the merger movement is continually reducing the number of top executive posts. Every merger, while it does not necessarily reduce the total of vice presidents and executive vice presidents, does reduce the number of chairmen and presidents. If all companies were combined into a single company there would be places for only one chairman and one president, and at most twenty-five members of the board.
That education is not the true gateway to the "royal road" is shown by the concentration of elite schools, long the special wards of the propertied. These schools,
eclipsing others, produced most executives because they were most patronized by the upper classes. In view of the fact that sons of members of the business elite, owners or big executives, were disproportionately represented and showed the highest index of upward corporate mobility, it would appear that belonging to the business in-group and the socially related professional group was a more significant factor than level or place of schooling in obtaining big-business position. Sons of owners, executives and professionals as a matter of course are more likely to go on to college, particularly to elite colleges, and after that into the higher executive posts. True, as Warner shows, men of lower social origins can and do make the grade, but in far lesser proportion than the incidence of low social origin in the population. Otherwise put, those who are already in at the beginning are more likely to be in at the final reckoning.
The typical business leader of the 1950's was 54 years old, had been with his firm 24 years, achieved his high position 24 years after entering business and had held his job for almost 7 years. Most men began business between age 21 and 22, freely shifted jobs and companies until about 29 years old when they joined their permanent firms. Typically, the man was 45 or 46 years old when he clearly emerged as a top dog. 24
But the longer his period of schooling the quicker he made it to the top. Graduate students made the very top in 19. 9 years, college graduates in 22. 9 years, college dropouts in 24. 5 years, high school graduates in 27. 9 years, high school dropouts in 30. 6 years and grade school products in 31 years. 25
So, the more schooling the successful entrants have (or the more affluent early circumstances) the quicker they make it to the top. At any rate, neither education nor in- group standing retard one in his ascent.
In beginning occupations, 43 per cent started as clerks and salesmen, 24 per cent as professionals, only 14 per cent as skilled or unskilled laborers. "Few at any point in their careers were entrepreneurs in the sense of owning or establishing their own businesses. Also, while there have been a number of cases of men moving from top-level military positions into key positions of late, these form only a minor proportion of the total business elite. " 26 So much for Mills's switchovers from the military to the corporate circuits.
The Horatio Alger hero, as Warner notes, is not very much in evidence.
"Careers are built largely on formal education, acquisition of management skills in the white-collar hierarchy, and movement through the far-flung systems of technicians and lower-level management personnel into top management. Traces of the legendary patterns remain, and spectacular examples of the type exist; they tend to be unique. " 27
Upward mobility toward the elite corporate level, Warner found, was especially marked in the area of marriage because most business leaders in all categories married above or below their levels of origin. Those of laborer origin married most frequently at their level of origin, 42 per cent; big-business people married next most frequently at their level of origin, 35 per cent. Professionals and white-collar people, exogamous at 77 and 81 per cent respectively, married most frequently outside their levels of origin, but nearly 20 per cent in both these cases married into the big-business class, took to wife a tycoon's daughter.
When a man marries above or below level of origin--and most of all categories did-- there is upward social mobility toward corporate elite status involved in marriage for the man or the woman. As the leaders all have elite status, it matters not how they got it, although women born below the elite obviously got there only through marriage. A woman is either in the elite to begin with, marries into it or marries a man who drags her along into it. 28
People who make it to the top or are born into the top are mobile in non-social ways. They are, first, geographically mobile, easily moving around the country from place to place. They are functionally mobile, readily adapting to a considerable range of jobs in which Warner detects much special educational stimulus; they are adaptable men. Those in the birth elite, however, tend to be less conspicuously geographical gadabouts.
External signs of steadiness and "stability" were most noticeable in the birth elite. The others, at least early in their careers, were more akin to rolling stones, willing to switch jobs and locations.
The number of men in the same firm as their fathers, compared with sons of the elite who achieve high position in other business organizations, is relatively small. There can be no doubt that each group of men was advantaged by being born to high estate. Only a few were directly aided by extra privileges and financial assistance; but the immediate factor of being born to families accorded high rank by the community provides such fortunate men with social and economic advantages, such as being in the higher levels of prestige where the powerful are, going to the "right" preparatory schools, having the right social relations and clubs and fraternities in college, and going with and courting young women of their own social set, knowing what to do and not to do (while the parvenu by trial and error is struggling to learn that there are such ways). They get a head start in life that can be overcome only by hard work, grim determination, and watchfulness of personnel offices, or the eager quest of great corporations for young men of promise. The birth elite are advantaged because their families learn "superior" values, goals, and standards by living in the subculture of an upper class. Their earliest adaptations from infancy on--nursing, weaning, cleanliness, likes and dislikes, admiration or dislike of intimate figures about them, later childhood goals and ambitions--are set within the learning maze of a "Superior" family. 29
It may be hypothesized that there are far more heart attacks among the nonelite upward strivers than in the birth elite: the Horatio Alger boys who never made it, dropped dead on the ten-yard line. I have found no studies of fatal illness in the candidates for success on the corporate ladder that compare the rate of such illness for groups of different social origin. One may surmise, however, that the man who makes it from laborer to retirement as chairman of the board has an exceptionally strong constitution. The road ahead somehow seems less rough with Scarsdale, Yale and Skull and Bones as take-off points.
Life around the Executive Suite
Life in the corporations, and in and around the executive suite, has been as closely studied as other phases of the executive terrain and has often been portrayed in best- selling novels and popular films. William Whyte's The Organization Man is one of the better known of the more mordant studies of the corporate bureaucracy and its foibles, and there are others. But for an impressionistic study of the headquarters office of the large finpolity there is nothing to excel Alan Harrington's Life in the Crystal Palace, written by one of its Harvardian denizens. Grimly forbidding to the Socialist, Communist and more generalized radical, the organizational generating point of human exploitation and debasement, the corporation on the inside is indeed nothing so much as a crystal palace, a place of shining light, elevated attitude and sweet benignity. "I think that our company resembles nothing so much as a private socialist system," says Harrington. 30
The whole of his book is a banteringly persuasive, penetrating embroidery on this theme.
What Marx suggested socialism might be like after it took over an irrational capitalism from a handful of selfish owners one finds here--at the headquarters of the
giant corporation. Here the byword is: From each according to his capacity without any great pressure, to each according to his needs in an ascending hierarchy of greater and greater privileges, boons and opportunities. Harsh voices are never heard in the Crystal Palace, nobody is ever bawled out, nobody is ever fired no matter how much he deserves it, everything is cushioned--benefits all around for everybody from day of employment until death.
"A mighty fortress is our Palace; I will not want for anything. I may live my days without humiliation. I will not be fired. It nourishes my self-respect. I am led along the paths of righteousness for my own good. I am protected from tyrants. It guards me against tension and fragmentation of myself. It anoints me with benefits. Though we pass through bard times, I will be preserved. These strong walls will surely embrace all the days of my life, if I remain a corporation man forever. " 31
And all this applies down to the lowliest clerk and office boy of the Crystal Palace, each of whom has in hand his plan of sure benefits until retirement and beyond. Everything is bland, bland, bland . . . and genteel, subdued.
But "As for the young man who has not gone to college, he is virtually untouchable so far as a middle-level job with a corporation is concerned. If Henry Ford were reincarnated he could never land a job at the Crystal Palace. In fact, on the technical side, an applicant will have quite a bit of selling to do if he can't produce a graduate school degree. " 32
"I suspect," says Harrington, "that most jobs in a corporation and elsewhere can be mastered in a few months, or at any rate in a year or two. What cannot be learned that quickly is the corporation minuet--the respectful dance with the right partners. The watchful corporation man gradually finds out who is important and who is not; what is acceptable and what is not; what type of project will advance his fortunes and what is not worth bothering about. The secrets of gauging and responding to the power of others--superimposed on a normal intelligence--will move him slowly upward. " 33
In the upshot Harrington found paradise boring. The hardest task was standing quietly on the escalator as it quietly swept one upwards toward the quiet stratosphere of quiet corporate power.
There was one cardinal sin at the Crystal Palace, Harrington found, and it could get one into serious difficulty. This was to be without the capacity for belief in the absurd, at least for believing in believing. Not to be a true believer of some acceptable sort stamped one as dangerous. As Harrington saw it, the hierarchy of acceptable beliefs from highest to lowest was as follows:
1. Belief in the product. "The highest and most satisfying form of commercial belief is the conviction that the product I am working for is essential, or at least helpful, to mankind. If I can't have that, I should be able to assume, at any rate, that our product is the best of its kind on the market. Lacking that, let me have faith that it is not positively the worst of its kind. Take even that away, and please assure me that it is not poisonous. Without such assurance, I will have to justify my job in another way. " The product, in short, is making the world a better place, at least not worse.
2. Belief in making money. "Money . . . measures the length and strength of my manhood. It is the skin of the dangerous leopard, the bacon from the wily pig that I bring home because I am strong, and know my way around the forest. . . . The possession of money makes men more masculine and women more feminine. Cash enlarges the soul. Money creates beauty where there was none before. It is positively erotic and can buy gaiety. When I have money I am a much nicer person, tolerant, kind
and understanding, and I forgive the sins of others. . . . " Moneymakers are great people, the greatest.
3. Belief in getting ahead. Attainment of status is the end in view here. You are what people think of you.
4. Belief in being a "pro" in doing a job professionally well whether one likes the job or not.
5. Belief in sheer process. "I believe in production. "
6. Belief in the company, whatever one's lack of belief in any of the foregoing. Not at the very least to believe in the company disqualifies one entirely.
For if I am lost in the split-level values of modern business, the High Corporation will serve as my High Church. Like the church, my Crystal Palace removes the burden of belief from me. It removes my need for decision. I have found my rock. I only believe in the company.
Like the church, our company is good and wise. In the context of business enterprise, it is the inheritor and vessel of a mighty tradition. Our company has achieved high ethics and kindness, and cares for me, and will see me through to sixty-five, and send me checks after that. Church and Palace alike are sanctuaries in the jungle of unbridled competition. At the head of the church is God. On the top floor of the Crystal Palace . . . it doesn't matter, since I will never arrive there. 34
The Big Money
The plush fortunes, few excepted, belong almost entirely to original owners of properties, mainly in the form of corporations, or their descendants. Leading executives, no matter how much they are paid, rarely put together overarching estates.
The way one becomes ultra-rich on the corporate circuit is to gain an early ownership participation in a rapidly developing company (preferably unnoticed) in a new field, precisely as in the nineteenth century. The trick is to see the new field opening up or to open it up. Most nonowner executives, as we have seen, make it to the top at about forty-five years of age, with only some twenty years to go before mandatory retirement. Even if they were able to put aside as much as $1 million a year out of cash salary, stock options and participation in undistributed profits this would guarantee only $20 million prior to retirement, not a pauper's portion by any means but still not up in the imperial range of the General Motors executives between 1920 and 1960 nor in the range of the $90-million estate left by Arthur Vining Davis of Alcoa.
In order to get into the really top money an executive must have taken his top position very early, which means that except in the case of an hereditary owner it must certainly have been a small or smallish little-known company when he took his position. Thereafter his fortunes became those of the burgeoning company; as a member of the inner family he becomes rich enough to arouse widespread envy.
Not many big new companies have emerged since 1920. Running down the Fortune list of the first hundred industrials we find International Business Machines, North American Aviation, Boeing, Radio Corporation, General Telephone, General Dynamics, Sperry Rand, United Aircraft, Allied Chemical, Minnesota Mining and Manufacturing, McDonnell Aircraft, Olin Mathieson, Textron, Celanese, Litton Industries, Douglas Aircraft, Reynolds Metals, Grumman Aircraft and United Merchants and Manufacturers. Even some of these embrace, through mergers, properties extant before 1920; most of them, however, are representative of new technology, mainly aviation, electronics and chemicals, and have been well served by war. Some started out rather big. It is in companies such as these that early executives who remain for many years
turn up with estates that are large but seldom within hailing distance of the big established fortunes multiply distributed among many family members. In this collection no fortunes have been produced to compare with the stupendous accumulations of Henry Ford and the General Motors crowd.
A rather fruitless running debate takes place desultorily between those who assert that the American economy is so developed that nobody can any longer scrape together a big fortune and those who claim there are as many opportunities for fortune-builders as ever. That there are lush opportunities cannot be denied. But that, in view of the great increase in population and the solidly established titles of hereditary wealth, the opportunities are nearly so many as once was the case is extremely doubtful. Concentration alone limits opportunities for financial devilment by newcomers.
While new technology does lift new men to positions of wealth, it should not be forgotten that old wealth-holders are usually careful to see that they are participants in the new technology. Thus, while the development of Polaroid made newcomer Dr. Edwin H. Land a very wealthy man--one of the few really wealthy inventors--he was in partnership with Harriman and Warburg money.
Corporation executives are the most highly consistently paid people in the American economy. If salary is a symbol of worth, as commonly supposed, they are the most worthwhile people in American society. In general, pay for administering large properties or organizations exceeds all other types of recurrent pay. The pay of top executives even in nonprofit organizations, such as foundations and national trade unions, also tends to be high, in the range at least of $50,000 to $100,000.
The most systematically, subtly and thoroughly trained people in the country, it will be generally agreed, are the scientists. Yet the median annual salary of 223,854 registered scientists in 1964 was only $11,000 a year, about the expense account of a middle-level salesman.
