The Power and Functions of Boards of Directors: A Theoretical Synthesis

Author(s): Mayer N. Zald

Source: American Journal of Sociology, Vol. 75, No. 1 (Jul., 1969), pp. 97-111
Published by: The University of Chicago Press
Stable URL: http://www.jstor.org/stable/2775615
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The Power and Functionsof Boards of Directors:

A TheoreticalSynthesis'
Mayer N. Zald
VanderbiltUniversity
Many social scientistshave assumed that the boards of directors
(governingboards) of corporateorganizationscontroltheirorganizations in name only. Others,examiningthe relationshipof American
social and businesselitesto the operationofwelfareorganizationsand
elite social clubs conclude that they are controlledby theirboards.
is resolvedby a theoreticalanalysisofthe external
This contradiction
"detachable" resources,personal characteristics,and strategiccontingencysituationsconduciveto more or less board power vis-a-vis
executives.Bases of board power include controlof resourcesand
knowledgeabout organizationaloperation. Personal characteristics
affectingboard memberspower are social status and sex. Strategic
contingenciesare eventsof organizationallifecycles,such as mergers,
major programand goal changes,and selectionof chiefexecutives,
conduciveto the exerciseof board power.
Such broad-scalemetaphorsas "The Managerial Revolution" (Burnham
1941) or "The Power Elite" (Mills 1957) directour attentionto the control
of major decisionsboth at the level of the total societyand of large-scale
organizations.Althoughthese metaphorsand theirassociated underlying
variables lead to hypothesesthat may be testable in long historicalperspective, they are too gross for short-runanalysis. In formulatinghypothesesabout the controlof organizations,forinstance,we mustspecifya
range of variables and conditionsunder whichelites or managersmay or
may not influenceimportantdecisions.
Analysisof the functionsand conditionsof powerof boards of directors
providesintellectualleverage on this question of the controlof organizations. The board of directorsof a corporateorganizationhas formaland
for controllingand maintainingorganizationaloperalegal responsibility
(Lattin 1959, pp. 211-78). The corporateformwith
tion and effectiveness
its board ofdirectors(governingboards) has been applied to manytypesof
organizations,for example, businesses, voluntary welfare associations,
agencies
privateschools,publicschoolsystems,hospitals,and governmental
with "autonomous" or independentfunctions.2
of
This paper was begunduringa studyof the Young Men's ChristianAssociation
Chicago,supportedby a grant(GM-10777)fromthe InstituteofGeneral
Metropolitan
MedicalSciences,NIH, USPHS. At a laterpoint,a grantfromthe VanderbiltUniversityResearchCounciland a CareerDevelopmentAward(K-34,919) NIMH, USPHS,
It is a revisedversionofa paperdeliveredat the 1968Annual
aided in its completion.
Meetingsof the AmericanSociologicalAssociation,Boston,Massachusetts.Mark S.
to earlierversions.
criticism
Massel,NicholasMullins,and JamesPricegave astringent
2 It shouldbe notedthattheearliest
werereligiousorders(see Davis 1961).
corporations
I

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AmericanJournalof Sociology
Yet as the size and scope of organizationshave increased,some scholars
have doubted whetherthe formalsystemof board controldoes any more
thanprovidelip serviceto the law. Those who arguethatboardsofdirectors
are merelya legal and coopted appendage believe organizationsare controlled by the full-timemanagers (Gordon 1945, chaps. 5 and 6). They
believe boards are at the mercyof the managerswho controlinformation,
definitionsof alternatives,the nominatingprocess,and, indeed, the very
agenda of decisionmaking.3On the otherhand, some students-especially
those looking at welfare organizationsand the American stratification
system,note that boards have ultimatepowerto hire and fireexecutives,
which shapes executives' decision premises (Hunter 1963, pp. 231-36;
Baltzell 1958,pp. 364-83).4
The pervasivenessof the corporateformin America and the disagreementover the importanceof boards of directorsrelates not only to sociologicalquestionsbut to policyones as well.Althoughthisessaydoes notdeal
directlywithpolicyissues,it is worthnotingthat questionsof the proper
and improperactivitiesof boards of directorspreoccupyseveral arms of
government.
In this theoreticalsynthesisof propositionsabout the power and influenceof boards of directorsour general orientationis that, in the relationshipsamong boards (as collectivities),individualboard members,and
executives,each partybringsto bear "resources."These resourcesmay be
based in legal rights,in monetarycontrol,in knowledge,or even in force
of personalityand traditions Resources may be crudely classifiedas
"detachable" resources,personalcharacteristics,
and strategiccontingency
situations.It is the balance of resourcesforspecificsituationsand decisions
that determinesthe attributionof relativepowerin the encounterbetween
boards and executives.
It must be noted that the power of boards of directorsor of individual
board membersdoes not referto theirformalvotingrights.As in so many
votingsituations,formalvoting may be irrelevantto many (though not
all) ofthe crucialdecisions.Instead, the powerof board membersrelatesto
theirservice on and controlof key committeesand the extentto which
3 "I've been concerned
and at the same timebothamusedand somewhatguiltyabout
the factthat the Board of Directorsmakespolicydecisions,bothby authorityof the
by-lawsand intheactualvotingtheydo; yetactuallyinthepresentday familycasework
agencythe staffhas to "educate" the Board constantlyand persistently
and it certainlydoes choosetheelementsofeducationwhichlead towardtheconclusions
ofwhich
thestaffapproves.In otherwords,we tellthemhowto vote and theyvote and we call
thatprocess'the Board setsthepoliciesofthe agency.. . .' I can franklyciteveryfew
instanceswhenBoard opinionhas influenced
my judgmentabout policyand practices
duringthe (many)yearsI have beenExecufiveofthisagency,althoughthe Board has
madeeveryimportant
policydecisionand has been 'informed'
ad nauseumbeforeevery
decision."This is froma letterwrittenby the executiveof a familyserviceagencyin
1956 (see Wilenskyand Lebeaux 1965,p. 273).
4Heffernan (1964) showshowsocialworkexecutivesmoderatetheirpoliticalactivities
to keepin thegood gracesoftheirboards.

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Boards of Directors
othermembersand the management(who may also be board members)
findit necessaryto be bound by theirperspectivesand ideas.
The corporationform(as we have cometo knowit) was createdas a means
of accomplishing"desirable" ends that werebeyondthe capabilitiesof individuals.Boards of directorswere created and recognizedin law in order
to insurecontinuityin the managementoforganizationsand to fixa locus of
forthe controlof "independent"organizations.5Boards are
responsibility
chargedwiththe properuse of resourcesin pursuitof organizationalgoals.
Directorsare not personallyresponsiblefororganizationallosses,but they
are responsiblefor prudentaction in behalf of the "owners" (whomever
that mightbe).
Prudent action includesappointingand perpetuatingeffectivemanagement of the organizationand overseeingthe work of such management.
This controlfunctionofthe boardsofdirectorsis inwardlooking;the board
operates as the agent of the corporationat the request of the owners
(members)to overseeorganizationalactivity.6
Because of theirformalpositionof responsibility
and theirinvolvement
in the organization,boards also develop an outward-looking
function;they
promoteand representthe organizationto major elementsof the organizational set, for example, customers,suppliers, stockholders,interested
agencies of the state, and the like. That is, they defendand supportthe
growth,autonomy,and effectiveness
of theiragenciesvis-a-visthe outside
world.
Obviously,boards differin the extentto whichthey performeitherthe
externalrepresentationor internalcontrolfunctions.For instance,it is
likely that boards of prosperousmanufacturingfirms,in a competitive
industry,and with unproblematicgovernmentalrelations,have less of an
externalrepresentation
functionthan welfareagencies heavily dependent
on wealthydonorsor on the communityfund.Similarly,in small organizationsin whichboard membershave intimateknowledge,they may decide
all nonroutinizedexpenditures,major personnelchanges, markets, and
typesof product.In otherorganizationsthey may be restrictedto formal
appointmentof the executive and the auditor and to settingexecutive
salaries.
Althoughthere is this variety,there are some relativelystandard activitiesin whichboards engage and whichhave implicationsfortheirpotentialpower. First, a major concernof boards tends to be personnel.At
the veryleast, boards usuallymust choose a chiefoperatingofficer
and decide on his salary (if there is one). Second, boards that are not "paper
boards," that actually hold meetingsand discuss organizationalaffairs,
I Althoughmuch of our discussion is applicable to governmentalorganizations,most of it
is framedin terms of nongovernmentalones. Governingboards and organizations in the
"public" sector tend to have less autonomy of organizational operation. Mainly discussing private organization gives our propositionsa greaterspecificityand concreteness.
6 We
usually think of boards of directorsas agents of the "owners," but legally they are
servants of the corporationvested with corporate control. On the ambiguities here, see
Marris (1964, pp. 12-13).

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AmericanJournalof Sociology
usually reviewthe financialconditionof the organizationand set financial
policy (dividendrates,capital indebtedness,etc.). In some cases the rules
and bylaws of the board requireformalapproval for all nonroutineexpendituresovera stipulatedamount.Finally,manyboardsrevieworganizationaloutput,its "product,"markets,and comparativeoperatingefficiency.
and to what extent,dependson the
Whichoftheseactivitiesare performed,
structureof the organization,its environmentalinterrelations,and the
sourcesof board memberpowervis-a-visexecutives.
DETACHABLE RESOURCES A POWER BASE

A resourceis "detachable" if it is not closelytied to the person,that is, if

it is transferable.Utilizinga cross-sectionalapproach, we examine gross
variables between organizationsand between board members causing
in the relativepowerof boards and individualboard members.
differences
There are two main bases of powerconsidered.First,the relativepower
of board memberscan be based on theiraccess to and controlof relevant
externalresources.Second, knowledgerelevantto the ongoingoperations
of the organizationmay be consideredan internalorganizationalbase of
powerdifferentially
distributedbetweenboards and executives.
EXTERNAL

BASES

OF POWER

of
The membersof a board of directorsmay servelargelyon the sufferance
the executiveor they may "represent"salient blocs of shareholdervotes,
sources of financialmaterial support,or of communitylegitimationand
In general,to theextentthatboardmembers
controlor reprerepresentation.
sentsalientexternal"resources,"theyare morepowerfulthanif theydo not
controlsuch resources.(For this and all other propositions,read "everythingelsebeingequal.")
in a corporationis an externalbasis of
Stockownership.-Stockownership
power because it is completelydependent on definitionsof legal rights
attached to shares. The ownerof commonstock does not own a "piece"
share of voting
of the corporation,but a rightto a certainproportionate
poweron a restricted
listofissues (includingtheelectionofboardmembers),
ofthe corporadeclareddividends,and, in the extremecase, the distribution
tion's assets. Board memberpower is related to the relative dispersalof
is widelydispersed,boardmembers
stockownership.Wherestockownership
havelowpower;whereboardmembers
majorblocsofstock,theyhave
represent
is highlyconcentrated,
only
highto moderate
influence;whereshareownership
theboardmembersrepresenting
thedominantgroupof ownershavehighinfluence.
Under high dispersionconditions,the incumbentmanagement(chairman and/orthe president)controlsthe solicitationand votingof proxies,
nominatesall committeechairmen,assignsthem to theirduties,and controlsthe internalprocessof the board. New board membersare appointed
at the discretionofthe nominatingcommittee,whichin turnis a creatureof
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Boards of Directors
the chairman's.In thissituation,the board and individualboard members
are relativelyweak.
By possessionof a largeenoughshareofvotes,a shareowner(or groupof
shareowners)can pressfora seat on the board.7Oftensuch representation
is equivalentto partial control,forthe managementwishesto avoid proxy
fightsand open conflicts.Therefore,the perspectivesof the votingbloc get
incorporatedin management'sdecisionpremises.However, there may be
severalsuch blocs.
When one personor familycontrolsa major bloc of stock or even a majority,8the powerofthe board,as a whole,and managementdeclines.Here
poweris centralizedas in the case of the widelydispersedownershipsituation, but now it is centralizedin the hands of the representativesof the
owningfamilyor person.Whilethe "forms"ofboard actionare maintained
the board servesat the discretionof the conto satisfylegal requirements,
trollingowners.
At least since Berle and Means (1932) it has been assumedthat the historicaltrendis towardthe dispersalof ownership.This particulargeneralization has served the interestsof those arguing"everyonea capitalist,"
of the extentof ownershipdisand it has led to a grossoversimplification
persion.It has also encouragedmany scholarsto assume that boards are
powerless.Villarejo's (1961, pp. 51-52) painstakinganalysisindicatesthat
ofthelargest232 (out of250 on the 1960Fortunelist) industrialcorporations
forwhichdata were available, the directorsas a groupowned 5 percentor
since this does not
moreof the stockin seventy-sixof them.Furthermore,
includestocksofcorporationsheld by othercorporationsrepresentedon the
board, there is no question but that there is even more concentration.9
but historically
Lundberg's(1968,App. B) moreimpressionistic,
rich,analyofthelargest200 corporationshave
sis wouldindicatethat about two-thirds
"large" familyholdings.Althoughdirectfamilyownershipof a majorityof
sharesmay have declined,the controlofstockin beneficialtrustscombined
withdirectownershipremainsa significant
controlbase.
Externalfundingand facilitiescontrol.-The generalpropositionabout
7 The ability to "press" for a seat on the board is related to the ability to wage proxy
fightsand to command the loyalty of otherstockholders.The insurgentsare more likely
to gain other stockholders' loyalties if the company has been unsuccessful in making
profitsrelative to its profitpotential. For a dramatic renderingof a proxyfight,see Nizer
(1961, pp. 427-524). The ability to press fora seat is also related to the voting rules required by the state. Cumulative voting aids minoritiesin electingdirectors(see Williams
1951).
8 I have been purposefullyvague about the percentage of stocks that must be owned
by a dominant family.If all otherstocks are widely dispersedor held by nonactive groups
(e.g., insurance companies, trust accounts in banks, pension funds) even 5 or 6 percent
may representa dominant bloc (see the discussion in Villarejo 1961, pp. 54-55).
9 Villarejo (1962, pp. 53-54) also studied the distribution of ownership among the
directorsin these 232 corporations.Of 2,784 directors (individuals, some holding multiple directorships),ninety-nine"propertied rich" (those who inheritedtheir shares or
who were wealthy before becoming attached to the company in question) owned 73
percent of the shares owned by all directors. Furthermore,12 percent of total shares
could be traced to the propertiedrich.
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AmericanJournalof Sociology
the externalresourcebase of board membersalso applies to control of
capital and facilities.For many corporations,profitand nonprofitalike, a
major sourceof board membercontroland influencestemsfromtheircontrolof crucialinputsof capital, raw materials,or "market."
Controlof externalresourcesservesas a leverforboard powerwhen the
organizationfindsit difficult
to secure these facilitiesfromother sources
and requiresthis resource.We would expect greaterdependencyon the
board membersrepresenting
banks duringdepressionsthan duringtimesof
prosperity.Furthermore,industriesthat are debt ridden would be more
likelythan othersto have representativesof lenderson theirboards; the
railroads,whichare a highdebt ratio industry,are reportedby Newcomer
(1955, p. 54) to have a higherproportionof bankerson theirboards than
other industriesshe studied. To the extent that organizationscan raise
moneyfromongoingoperations,both the money marketand the money
lenderbecomeless importantto the organization,and externaldependency
is decreased.-"
The propositionabout externaldependencyalso applies to nonprofit
and
voluntaryagencies. The historicpatternof raisingfundshas seen a shift
fromthe support of agencies by a few wealthy philanthropiststo mass
campaignsand communityfunds.When agencieswerethe "agents" of one
or two families,or a small circle,the policiesand procedureswere sharply
governedby thesemembersofthe board and by the chieffunders.As funding shiftsto the communityfundor to mass drives,the powerof the board
as fundersmay decrease.Two corollaryhypothesescan be stated forvolunin small amounts
tary agencies: (1) The moreagenciesreceivecontributions
frommanygivers,thelessthelikelihood
ofboardmembers
havingpowervis-a-vis
theexecutives.(2) To theextentthatfund-raisingcampaignsare based more
on a sharpimageofneedand less on interpersonal
relationsofboardmembers
and fund raisers,we would expecttheinfluenceof the board memberto be
diminished.
The growthof communityfundshas a complexrelationto the structure
of individualboards. The fundrepresentsa centralizedsource of financial
support,and the amount received fromthe fund can be crucial to the
agenciesinvolved.
The fundsthemselvesallocate moneythroughcommitteesmade up of
businessmen,housewives,and professionals.To the extent that profes10 Commentators of the Berle and Means school have argued that as corporationshave
grownlarger theirpolicy of retaininga large proportionof earningsratherthan distributing them as dividends (most of the larger corporations distributeless than half of net
earnings) leads to the corporationsbecomingdivorced fromthe moneymarket,and to the
decline of importance of the role of bankers and especially investmentbankers. A word
of caution is in order. Littner (1959, pp. 166-201) has summarized his studies of the rate
of borrowings,bond flotation,and the like. His findingssuggestthat the rate of corporate
borrowingshas not declined over time-instead it fluctuatesinverselywith the cost of
money. Furthermore,he concludes that even among the largest nonfinancialcorporations
there is no long-rangetrend forincreased reliance on internal funds.

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Boards of Directors
sionals dominatethe funds,we would expectthe boards of the agenciesto
become less important in intercedingfor the organization. However,
studentsof these organizationssuggestthat thereis a correlationbetween
the prestigeof the boards of agencies and theirlikelihoodof having their
requestsgranteda respectfulhearing.Auerbach (1961) suggeststhat the
settlementhouse servinga slum neighborhoodbut having an unknown
boardis less likelythanthemiddle-classagencyhavinga prestige("power")
board to receivea favorablehearing.The high-prestige
board membermay
not only be generallyrespectedbut may controlsignificantfinancialcontributionsto the fund. If Auerbach is correct,the maintenance of a
prestigeboard facilitatesrelationswiththe communityfund.
Communitylegitimation.-Boardmembersmay controlneither-shares
nor tangible externalfacilitiesand yet "control" an importantexternal
resource,a segmentof communitylegitimation.They controlcommunity
legitimationin that they "represent"diversegroupsor interestswhichcan
be mobilized to affectthe organization.Such organizationsas boards of
educationand governmentcommissionshave boards eitherelecteddirectly
by the votersor appointedby the politicalexecutive.In general,themore
closelyboard membersare linkedto externalgroups,the morethey"reprethemorepowerfultheyare vissent" community
legitimation
and, therefore,
a-vis theadministrative
leadership.Board membersmay be elected or appointedand yet not representgroupinterestsif,forinstance,appointment
is "nonpartisan"and if board membershipis largelysymbolic.The more
diverseand intensethe interestsin a givenorganization,however,the more
likelythe organizationis to be politicizedand the morelikelyboard members are to representcommunitysegments.
All threeof the externalbases of power discussedabove provideopporresourcescontunitiesforfactionsto arise as groupscommandingdifferent
of organizationalgoals and directionsand forcontrol
tendforthe definition
of the organization.The largerthenumberof boardmembers
havingexternal
toarise.Furtherbasesofpower,themorelikelyarecoalitionsofboardmembers
more, given a number of board memberswith externalbases of power,
thedefinitions
themoredivergent
oforganizational
goals and policies,themore
likelyare thecoalitionsto resemble
factions.
Even if board members do representexternal interests,ownership,
or sourcesof funding,factionsneed not arise and board membersneed not
attempt to influencemanagerial decision premises.An ideology of professionalismmay lead to an effectiveabrogationof the role of the board.
In such cases, the board serves to provide a mantle of legitimationand
communityjustification(Kerr 1964). Onlywhen a givenissue is definedas
outsideoflegitimateprofessionalcompetencewillboard members'attitudes
and perspectivesbegin to influencedecisions. Thus, Crain and Street
(1966) note that, in large cities,on the issue of school policy toward deit is the board and its attitudes,not the schoolsuperintendents'
segregation,
professionalor personal perspectives,that predictthe outcome of policy
debate.
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American
Journal
ofSociology
INTERNAL

RESOURCES:

KNOWLEDGE

Knowledgeis a "detachable" resourcein that it can be acquired and lost.

Detailed knowledgeof the organizationand its problemsis a sine qua non
ofdecisionmaking.The board memberor executivewithoutknowledgehas
difficulty
the decisionprocess,especiallywhenthereare agreedinfluencing
upon goals. Knowledgecan comefromdetailedfamiliarity
withthe specific
organizationor fromgeneral expertiseabout a given technical process.
Several conditionsof organizationalsize, complexity,and technology
conditionthe ability of boards to have sufficient
knowledgeto challenge
and/orformulatelinesofaction.At the mostgenerallevel,sufficient
knowledge is a functionof the degreeof complexityof the organizationand the
technicalityof its knowledgebase. The greaterthecomplexity
of theorganization and themoretechnicalits knowledge
base, the lowertheinfluenceof
boardmembers.
This propositionleads us to expect,forinstance,that larger
organizations,
withmanyproductlinesor task domainsand geographically
dispersedunits,would have a less well-informed
board than smaller,more
concentratedorganizations.
When an organizationis small,withfewplants,products,and markets,
the directorscan have independentknowledgeof the plants, contactwith
the staffat several levels, and detailed acquaintance with the community
and marketsituation.As the organizationgrowslarger,the board member
becomes increasinglydependenton the staffforhis information.
Furthermore,the organizationis usually structuredto channelinformation
to and
throughthe presidentor chiefoperatingofficer.Thus, the board becomes
dependenton the executive,and one of theirfew outside checks becomes
the balance sheet,subject to independentaudit. Even accountingreports
may become so complexthat a high degreeof familiarityand expertiseis
needed fortheirinterpretation.
Of course, as the organizationbecomes larger and more complex,the
chiefoperatingofficers
also become moredependenton theirstaff.But the
staff'sconditionsof workare directlydependenton the executive,and to
some extenthe is able to use them as his eyes. Even thoughthe executive
is formallyappointedby the board,his greaterknowledgeof the fullrange
of organizationalconcernsallows him to shape the kinds of information
theyreceiveand the kindsof mattersthey discuss.
Boards may be adapted to this imbalance in knowledgeby being required to spend more time on organizationalaffairs(Brown and Smith
1957, pp. 57-59). Sometimes,the appointmentof "inside" board members
(full-timeexecutives)is recommendedas a solution,but the independence
of the officer
fromthe chiefexecutivecannot be assured.1"
The relevanceofknowledgeto powerbecomeseven clearerifwe examine
organizationsin whichvariouskindsof professionalsand scientistsfurnish
11 Questions
aboutthefunctions
ofinsidedirectors
pervadethepolicy-oriented
literature.

Wiley(1967) showsthat amonglargecorporations

thereis a slighttendencyovertime
forthemto have a greaterproportionof outsideboard members.His findings
are at
variancewithpopularstereotypes.

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Boards of Directors
the key servicesof the organization.For instance,we would expectboards
of directorsof hospitals to be concernedmainly with financialmatters
while boards of educationalinstitutionsmighthave a greatersay in personnelmatters,thoughnot curriculummatters,and finally,boards of such
organizationsas YMCAs mightbe involvedin decisionsabout all phases of
organizationalactivity.Where the knowledgebase is esoteric,the board
is not able to evaluate the requirements
ofthe organizationfornew linesof
endeavor,or to evaluate lines of action and personnelexcept in termsof
fiscalmatters.
Again thereare adaptive solutionsto the imbalance. Boards may delegate to internalcommitteesthe evaluation of projectsinvolvingtechnical
decisioncriteria.Second,theymay add to the board memberswithtechnical knowledge.General expertise,acquired outside of the organization,
becomesa base forpower.
To this point, I have offeredpropositionsabout bases of power which
increaseor decreasethe board members'potentialto influencethe policies
of large-scaleorganization,focusingon externalresourcecontroland the
relativeimbalanceof knowledge.However,this cross-sectionalapproachis
limitedin at least two ways. First, I have played down the identitiesor
characteristicsof board membersthat may influencetheirrole in boards.
Second, I have ignoredthe processand phasingof boards that lead them
to be moreor less importantand powerfulat different
times.
PERSONAL CHARACTERISTICS AND PARTICIPATION

Attributesattached to personssuch as social status, sex, and personality

are verygeneralfactorsinfluencing
how an individualwill relate to others
and how otherswill respond.While they are not "detachable" resources
(at least to the same extent) as were those discussedin the last section,
they are externalcharacteristicsbroughtinto the board-executiverelation
fromthe largersociety,and they affectthe participationand influenceof
board members.'2
SOCIOECONOMIC

STATUS

Given the structureof Americansociety and the functionof boards in

controllingproperty,in legitimatingvoluntaryagencies,and in linkingthe
it is not surprisingthat membersofboards
activitiesof diverseinstitutions,
of directorstend to be selectedfromthe higherreachesof the stratification
system.While some organizations,such as YMCAs and settlementhouses
may dip into the middle-middleclass'3 for a few board members,most
Goffman(1961,p. 30) distinguishes
between"externalresources"and "realizedresources"to discussthe exactlyparallelphenomenaof how externalresourcesbecome
ofinteraction
determinants
locallyrealized.
13 In our studyof the ChicagoYMCA, less than 10 percentof the almost1,000board
membersof the thirty-seven
local departments
wereratedin 1961 as earningless than
$8,000a year.
12

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AmericanJournalof Sociology
board memberswill be drawnfromthe higherreachesof the socioeconomic
pyramid.
The prestigeand status of the board membergives him a reputation
whichaffectsothers'reactionsto him,and it giveshima set of expectations
of how othersshould react to him. In general,thehighertheprestigeand
themorelikelyotherboardmembers
and staf are likelyto
statusofthemember,
deferto his opinions.
Of course,reputationand generalizedstatus do not fullydetermineinfluence.Strodtbeck,James,and Hawkins (1957) have presenteddata from
jury deliberationsindicatingthat the higher-status
jury membersare more
likelyto be chosen as foremenand have highrates of initial participation
and, presumably,influence.However, they also note that, over time,the
correlationbetweenSES, participation,and influencedeclines.Generalizing
fromthe findingsof Strodtbecket al., we mightexpect that, if theonly
thelowcriteriaforallocatinginfluenceis participationand knowledgeability,
status memberswho participatehighlyand are knowledgeable
will become
equal to the higher-status
board members,even thoughofficers
will be more
members.
likelyto be drawnfromhigher-status
However,if the functionsof boards involvemorethan just deliberation
(as in the jury), the externalresourcesof votes controlled,access to funds,
and prestigewhichcan be used in interorganizational
relationswill guarantee to the higher-status
board membersa greatershareofinfluence.(See the
above discussionof the role of "power" boards.) Furthermore,
if we-compare boards composedof people of different
status levels, those in higherstatus boards are likelyto expect a higherlevel of deferenceand influence
than boards composed of people fromthe middle ranks (Moore 1961).
The commentsabove also apply to the relationofexecutivestoboards as
well as among board members. Some boards employ executives whose
salaries and status may be equivalent to or higherthan that of the board
members(e.g., in some YMCAs and in school boards). If so, executiveinfluenceis enhanced.
SEX

Societal role definitionsassociated with sex also influenceboard member

participation.Babehuk, Marsey, and Gordon (1960) found that, in a
middle-sizedcommunity,
womenare morelikelyto be on boards of smaller
and low prestigeorganizationsthan on the boards of the largervoluntary
agencies-the hospitals and universities.Not only do women have less
commandof externalresources they rarelyrepresentmajor bureaucratic
organizations-but, on the average, they are socialized to more passive
role taking. In boards with male executives,we would expect women to
have less influencethan men,to participateless freelyin discussion,to be
less assertive,and to be taken seriouslyto a lesserdegree.
Otherpersonalcharacteristics
also influenceboard-executiveinteraction.
The range of personalityand self-presentation
variables that are relevant
is well known.Instead of pursuingthem,the discussionturnsto phases of
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Boards of Directors
organizationalgrowthand changethat implicateboard power.In theselast
two sectionsresourceshave attached to the individualrole occupant.But
nowwe turnto powerresourcesattachedto the situation,thatis, to the role
expectationsand definitions
createdby the ongoingsocial system.
STRATEGIC CONTINGENCIES SITUATIONS

Examinationof the functioning

of a board over long periodsof timewould
reveal an ebb and flowof board functions,importance,and power during
differentphases of organizationaldevelopmentand activity. Organizational phases affectthe power of boards in several ways. First, at some
pointsin the historyof an organization,the formalrequirementsof board
ratificationand action requireat the veryleast that managersget the approval of the board. Even if the board is but a rubberstamp,such periods
of the image of board power. Furthermore,at
allow some reinforcement
such timesdissidentboard membershave a chance to crystallizeboard discontentwithmanagementand to expresssuch discontent.At othertimes,
the absence of meetingsand debated issues prohibitssuch expression.
Second, the phases of organizationaldevelopmentrequire the board to
performactivitiesin the serviceofthe organization such as fundraisingthat give it powerover the managers.Thus some of our "cross-sectional"
propositions(above) may also be implicatedin the phase developmentof
organizations.
Let us specifya numberof broad organizationalproblemsthat not only
require board action but also seriouslyimplicate the responsibilityof
boardmembersto debate and decideorganizationalmatters.
The generalpropositionis that it is duringthehandlingof major phase
problems,or strategicdecisionpoints,thatboardpoweris mostlikelyto be
asserted.It is at such times,too, that basic conflictsand divisionsboth
withinthe board and betweenthe managersand the board are likelyto be
pronounced.Three types of broad-phaseproblemsare discussed:life-cycle
problems,choosingof successors,and fund-raising
and facilitiesexpansion.
LIFE-CYCLE

PROBLEMS

Life-cycleproblemsare those of organizationgenesis,characterformation

and transformation,
and basic identity.
Organizationgenesis.-When a corporate organization is newly e~stablished,or whenthe board as a responsibleagentis beingformed,a great
deal of attentionis likelyto be paid to the formulationof policy,the roles
of managers and boards, and the formulationof guidelinesfor actions.
Boards will meetregularlyand often,and it is likelythatboardpowerand inused and calledupon.
fluencewill be continuously
But qualificationis in order;many businesscorporationsdevelop out of
individuallyownedfirmsor partnerships.If the new board does not control
ownershipcertification,
the powerofthe board may be relativelyrestricted
duringthis period.
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AmericanJournalof Sociology
develop characters
Charactercrises and transformation.-Organizations
which become institutionalizedin procedures and modes of handling
problems.Organizationalcharacter,a termused by Selznick (1957), is the
standardpatterndevelopedforresolvingrecurringand basic problemsand
conflictswithinthe organizationand withthe organization'senvironment.
and intraorganizaThese includesuch aspects of organizationenvironment
tion relationsas labor policy,major productemphases,marketstrategies,
relationto competitors,
and quality-quantity
emphases.
Pressuresto changethese aspects of characteralmostinevitablybecome
issues for the board of directors.First, both legal requirementsand the
standardfunctionsof boardsin policysettingbecome obviouslyimplicated
when the major dimensionsof the organizationare subjected to change.
Second,if these aspects of characterhave developed qualities of the sacred
and traditional,as so oftenhappens, changingthem is likely to develop
conflict.The managerswillbe forcedbothby divisionsamongthe managers
and by the awarenessofconcernedboard membersto bringsuch mattersto
the board.
In general,themoreroutineand stabletheorganization
in all its aspectsforexample,labor,market,
financing,
etc.,-thelesslikelyarecrisesofcharacter
to occurand theless likelyare boardsto be mobilized.'4
tosolvein organizaMoreover,character
crisesare likelytobemoredifficult
criteria"5
For intionswithoutcomputational
forchoosingamongalternatives.
stance, voluntarywelfareagencies with their ambiguous goals and unproven means are likelyto have more prolongeddebate on such matters
than are businesses.
Identitycrises."-6Large-scale organizationshave identitycrisesof several
kinds.One is the crisisofmergersin whichthe existenceof the organization
as an organizationis threatened,even thoughthereis perpetuationof the
functionand the capital ofthe organization.A secondis the threatto vanish
with other
entirely.A thirdidentitycrisisis involvedin joint undertakings
organizations.Such jointundertakingspartiallyrestrictthe autonomyand
independenceof organizations.
Because thereare oftenclearbenefitsto be gainedthroughorganizational
it is possiblethat businesscorporations,as a
mergersor joint undertakings,
class of organizations,have a higherrate ofidentitycrisesthan otherkinds
oforganizations.However,YMCAs, orphanages,settlementhouses,ethnicbased communitycenters,religiousdenominations,universities,governand othershave all faced identitycrises-problemsof
mentalcommissions,
fissionand fusion.Again,it is whenissuesliketheseare debated that boards
are mostfullyinvolvedand likelyto have influence.
See an interview
withCordiner(1967),former
presidentofGeneralElectric,fora disof organizational
cussionof the roleof the board duringGE's internaltransformation
structures.
16 The phrase"computational
criteria"refers
to knownmeansto agreed-upon
goals (see
Thompsonand Tuden 1958,pp. 195-216).
16 Identitycrisesare subeasesof character
crises-i.e., thosesubeasesin whichan organization'ssocialrecognition
as an entityare at stake.
14

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Boards of Directors
CHOOSING

A SUCCESSOR

Oftenthe only real contact board membershave with the organizationis

throughthe chiefexecutive,and one of the primeresponsibilities
of boards
is the choice of effective
managerialleadership.In some organizationsthe
board choosesonlythe chiefexecutive,but in othersthe board may take an
active part in appointingmostupperexecutives.The amountof active participationin appointingupper executivesis probably a good index of its
power.More importanthere,it is at thetimeofchoosinga successorthatboard
poweris mostmobilized(Zald 1965).
Successionprocessescan varygreatly.Of course,if a dominantexecutive
or controllinggroup creates a "crown prince" or appoints the successor,
then the board as such only ratifiesthe appointment.A crown prince
appointmentby a chiefexecutive (not by a controllingownershipgroup)
can onlybe effective
whena retiringchiefhas been seen as successful.Thus,
just as we suggestedthat the board is more likelyto be active when an
organizationis involvedin crises,so too is it morelikelytobe activein choosing a successorwhentheorganizationis facinga crisis.
The choosingof a successoroftenallows the basic questionsof organizationalmandate,character,and identityto cometo the fore.Since the choice
of the executiveis so closelylinkedto decisionsabout organizationaldirections,it is naturalto have a periodof stock takingat that time.
Since the mobilizationof board influenceoccurs around the time of
succession,the periodicityof succession becomes of great importance.
Because ofdeaths,age, and careerpatterns,someboardsmay be confronted
fairlyoftenwithquestionsofsuccession,whileothersmay onlyconfront
this
question once in a generation.(Some Protestantdenominationsappoint
their ministersyearly, while many larger business corporationstry to
arrangeforten-yeartermsfortheirchiefexecutives.)
CONCLUSIONS

Such phrases as the "managerialrevolution"or the "power elite" call to

mind great forcesand processesin society.Some of the propositionsimplied by the metaphorsare patentlytrue.For instance,it is clear that large
bureaucraticorganizationsare hallmarks of modern society, and, consequently,the heads of these organizationsare in a positionof potential
power.Nevertheless,detailedinvestigationis requiredto spell out the conditions of their power and their relative power in differentsituations.
Eventually,a complextheoryof powerand controlin modernsocietywill
be required.
Without directlyattacking the global questions posed by Burnham
(1941) and Mills (1957) we have dealt with one aspect of the phenomena
they discuss-the control of major bureaucraticorganizations.In particular we have suggested a range of externaldetachable resources,personal characteristics,
and strategiccontingencysituationsthat affectthe
conditionsof board power. Many of the hypothesespresented appear
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AmericanJournalof Sociology
fairlyobvious. Nevertheless,taken together,this presentation,I believe,
demolishesthe cavalier approachto boards taken by both economistsand
sociologists.Boards of directorsmay sometimesbe impotent,and theymay
sometimesbe all powerful.The questionis: In what kindsof organizations
underwhat conditions?
morecomplextheoreticaltreatmentsare possible. Boards
Furthermore,
may be mostimplicatedin decisionswhenthe unifiedchain of commandis
brokenup. For instance,as hospitalshave come to look morelike pluralistic polities,boards may reenterthe powerarena eitherat the invitationof
the contendingparties(Perrow1963,pp. 112-46)'7 or on theirown accord.
Furthermore,the stance of the manager may lead to great variation in
board involvementand power.Chief executivesrange fromthose that are
obsequiousto theirboards,to those that are Machiavellian-manipulating
consensus-to those that are disdainfulor at least unconcernedwith their
boards. Executives help to develop traditionsof board consultationand
influence,and these traditionscan become bindingupon the organization.
variables of interestand commitmentare also imporSocial-psychological
tant,forit may be that lack ofinterestis a basic cause ofthe diminishment
of board influence.
This workhas been largelytheoretical.At thispoint,thereis a scarcityof
meaningfuldata, and onlyat a fewpointshave I been able to tie my argumentsto evidence.Boards of directorsare hard to study. Oftenthey conduct theirbusinessin secret;theirmembersare busy people; the processes
describedby novelists.Neverthemselvesare sometimesmost effectively
theless,study is possible,and pieces of evidence can be broughtto bear.
ofstudyis morethan compensatedforby the theoreticaland
The difficulty
practicalimportanceof the problem.
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