The social organization of the Canadian capitalist class in comparative perspective

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  • The social organization of the Canadian capitalist class in comparative perspective

    MICHAEL ORNSTEIN York University*

    Janalyse, dans cet article, la structure de la classe capitaliste canadienne. Pour ce faire, je compare le reseau de liens entre les conseils dadministration des 256 corporations canadiennes les plus grandes, a ceux existant aux Etats-Unis et dans neuf pays dEurope. Jarrive a la conclusion que le degre de fragmentation du reseau canadien nest pas inhabituel, et que les clivages entre capital industriel et financier, ou entre capital domestique et etranger ne sont pas particulierement prononces. Qui plus est, le capital industriel nest ni subordonne ni peripherique au capital financier. Le reseau canadien ressemble beaucoup a ceux de plusieurs pays europeens, dont 1Allemagne et la France, a propos desquels on ne peut pas avancer dexplication en termes de dependance ou de sous-developpement. La fragmentation des reseaux americain et britannique, par contre, est netternent plus Qlevee.

    This paper assesses claims about the character of Canadian capitalist class by comparing the network of interlocking directorates among the largest 256 Canadian corporations to the corresponding networks in the U.S. and nine European nations. The analysis indicates that the Canadian inter-corporate network is not unusually fragmented, that there are no pronounced cleavages between industrial and financial capital or between foreign and domestic capital, and that industrial capital is neither subordinated nor peripheral to finance. The Canadian network is quite similar to the networks of a number of European nations, such as Germany and France, about which it is impossible to advance arguments about dependency and underdevelopment. In comparison, the networks of the u.S. and Britain are unusually fragmented.

    Although they do not rule, there is now abundant evidence that capitalist classes are conscious of their class interest and organized to pursue it (Useem, 1984; Langille, 1987) . The organization of capital takes four related forms: intercorporate ownership provides direct, hierarchical links between

    * I thank Beth Mintz, John Myles, Frans Stokman and especially Robert Brym for helpful comments on earlier drafts of this paper.

    Canad. Rev. SOC. & Anth. / Rev. canad. SOC. & Anth. 26(1) 1989

  • 152 MICHAEL ORNSTEIN

    some corporations; interlocking directorates link the boards of the largest corporations; membership on the boards of universities, hospitals, cultural and charitable organizations, political parties, governmental advisory com- mittees and social clubg provides another meeting place; and many organi- zations explicitly organize and represent corporate views.' These different forms of organization serve different, although complementary needs. In- tercorporate ownership co-ordinates the activities of some groups of cor- porations but cannot serve to formulate and pursue a broader political strategy. The interlocking directorates that link most major corporations and business participation in cultural, charitable and social organizations provide an arena for building a political consensus, but they are not as ef- fective at pursuing specific policy objectives as more clearly policy-oriented business organizations.

    There is an urgent need for comparative studies of the social organiza- tion of capital. The known, broad and theoretically significant national var- iation in the structure and organization of the working class, the state and political life should correspond to important differences in the organization of capital. Because, in most contexts, capitalist classes are much less visible than the labor movement, the economy and the state, comparative studies of capital are difficult to undertake. Without minimizing the difficulties of reconciling statistics from different nations, the large and impressive body of research on the contemporary welfare state is testimony to what can be accomplished using official statistics. By comparison there is little system- atic, comparative research on the social organization of capital. National ac- counts data and other economic indicators certainly provide aggregate measures of the activity of capital - but there are no grounds for assuming these are a simple reflection of the organization of capital. Comparative data on interlocking directorates, on business organizations and on the repre- sentation of business in education, cultural, governmental and other organi- zations cannot be looked up; they must be gathered directly.

    This paper builds on one such effort to gather and analyse comparative data on the social organization of capital, the study of interlocking direc- torates of the 250 largest corporations in Austria, Belgium, Britain, Finland, France, Germany, Italy, the Netherlands, Switzerland and the US., which is reported by Stokman, Ziegler, and Scott (1985). Data from these 10 na- tions provide a context for an analysis of interlocking directorates in Canada. While there are important limitations to confining this study of Canadian capital to interlocking directorates, an analysis of interlocks is certainly critical to a broader empirical study conceptualizing national var- iations in the organization of capital.

    Three different bodies of theory and research, which are discussed in turn below, provide insight into the task at hand. First, the recent discussion of the development of the welfare state raises some very general questions about the organization of capital. Second, the organization of the capitalist class plays an important role in the tradition of Canadian political economy. And, third, there is an important tradition of research on the control of capi- tal.

  • 153 SOCIAL ORGANIZATION OF CANADIAN CAPITALIST CLASS

    THE CAPITALIST CLASS AND THE SOCIAL DEMOCRATIC MODEL

    The richest tradition of comparative research on contemporary advanced capitalism involves the elaboration of what is variously referred to as the class conflict paradigm (Shalev, 1983: 28) or social democratic model (Skocpol and Amenta, 1986: 140ff.) of the welfare state. The argument is that differences in the development of contemporary welfare states reflect the relative strengths of the working classes of different nations - as indi- cated by the proportion of workers belonging to trade unions, the electoral strength of social democratic parties and their ability to form governments, and so on.2 The relative power and political organization of capital are as- sumed to be inversely proportional to the power of labor and the left politi- cal parties, since social reforms represent strategic victories of labor over capital. Measures of the power and organization of capital are absent from the social democratic model (see Shalev, 1983: 29) on the assumption either that they are very strongly correlated with other variables in the model, or that beyond these correlations, the organization of capital has no influence on the welfare state. As Shalev (1983: 82) observes, one justification for re- stricting the social democratic model to a focus on the power of labor in- volves the policy focus of these studies, the policy package associated with the welfare state conventionally addresses only problems connected to em- ployment and distribution, and not the twin loci of control to which capital historically assigned priority, namely accumulation and labor process.

    The social democratic model implies that nations with weakly developed welfare states, such as Canada and especially the u.S., should have stronger and better organized capitalist classes. One obvious difficulty with this ar- gument, however, is immediately apparent from a consideration of the balance of class power in Sweden, the exemplar of the welfare state. Al- though the development of the Swedish welfare state is unquestionably marked by strategic victories of labor over capital (see Korpi, 1978), there is also a remarkable concentration of power within the Swedish capitalist class (see Sundqvist, 1987). Furthermore, the organization of Swedish capi- tal in the Employers Federation is both more unified and plays a much more important role than the comparable Canadian organizations. The point here, made clearly in theoretical arguments about corporatism by Panitch (19861, Schmitter (see the essays in Schmitter and Lehmbruch, 1979) and others, is that the system-wide bargaining in the welfare state requires the organization of labor and capital. Without the centralized organization of capital, extensive consultation between business and the state, let alone tri- partism, is impossible. Explaining Swedish tripartism, Panitch notes that the sine qua non of the whole edifice was the capacity of both the SAF and the LO [respectively the Swedish Employers Federation and the central trade union organization] to commit their affiliates to central agreements (1986: 57). Analysing data from the 10 nation comparative study, Ziegler provides the link between the network of interlocks and corporatism: those four countries having the least centralized networks of interlocking direc-

  • 154 MICHAEL ORNSTEIN

    torships (France, Great Britain, Italy and the USA) also show weak forms of corporatism (1985: 280).

    Suggestive of the weakness of Canadian labor and corresponding disor- ganization of capital is the slow development of the welfare state in Canada, relative to the typical Western European experience (although, as Kudrle and Marmor (1981: 83ff.) show, after the adoption of medical insurance and maternity benefits in the early 1970s, social insurance coverage in Canada is not far from the mean for Europe). The results of Colemans (1986) study of business associations in Canada are consistent with this argument:

    There is little doubt that the system of business associations is underdeveloped. It is characterized by congeries of isolated groups: intersectoral associations operate independently of divisional associations, divisional associations of sec- toral associations ... and sectoral associations of subsectoral associations. Regional associations are paid little attention and the representativeness of as- sociations with more general domains is suspect. (Coleman, 1986: 272)

    This view of the relative disorganization of Canadian capital has not, however, gone unchallenged, especially as it relates to the Business Coun- cil on National Issues (the BCNI), whose representativeness and effective- ness is repeatedly questioned by Coleman. In a recent study Langille (1987: 70) argues that: In the course of the last decade, the Business Council on National Issues has become the most powerful and effective interest group in Canada - to the point where it can now exercise hegemony over both the private sector and the state. Langille cites compelling evidence of the BCNIS effectiveness in promoting free trade (also see Cameron, 19881, in designing an exit from the National Energy Programme and in shaping competition policy. In view of its supposed hegemony, however, it is surprising (as Lan- gille acknowledges) that the BCNI has been quite ineffective in achieving major reductions in social programs, government spending and the deficit.

    Despite the qualifications offered by Langille, on the whole this litera- ture suggests that Canadian capital is relatively disorganized, perhaps be- cause the weakness of labor has allowed capital to influence policy without strong organization. As the next section shows, this view is consistent with the now dominant view in Canadian political economy.

    THE CANADIAN CAPITALIST CLASS: UNDERDEVELOPMENT AND FEDERALISM

    In terms of its economic strength - defined as the ability to sustain capital accumulation and defend itself from foreign and state intervention - the Canadian capitalist class is widely regarded as exceptionally weak and frag- mented. The uniquely high degree of foreign ownership and correlated overdevelopment of extractive industry and finance, relative to manufac- turing, is often said to be more characteristic of underdeveloped than developed capitalist nations3 In structural terms, this proposition is self- evident. In no other advanced capitalist nation is nearly half of all manufac- turing in the hands of foreign owners. The disproportionate development of extractive industries is less unusual, however, especially if Canada is com-

  • 155 SOCIAL ORGANIZATION OF CANADIAN CAPITALIST CLASS

    pared to other nations with extensive natural resources, such as Australia and the U.S. More controversial is the related argument that the structure of the Canadian capitalist class is distorted.

    The strongest claim about the uniqueness of the Canadian capitalist class is advanced by Naylor (1972), who argues that Canadian capital is domi- nated by a mercantile element of corporations in the financial and trans- portation sectors.* Clement (1975) argues that the Canadian capitalist class is divided into indigenous and comprador elites on the basis of the dis- tinction between Canadian and foreign ownership. Although foreign control is concentrated in particular industries, in Canada the relationship between ownership and industry is not strong enough to make Naylors and Cle- ments claims identical. More recently, Niosi (1985: 58) has advanced a com- plementary, but still broader argument,

    As a social group the Canadian bourgeoisie is deeply divided. With so many large foreign multinational corporations present in Canada there is a comprador counterpart to the autochthonous Canadian bourgeoisie whose job is to manage these foreign subsidiaries ... The regional character of the Canadian economy provides a second basis for cleavage within the bourgeoisie ... land1 ethnicity is a third source of cleavage ... the Canadian capitalist class is now deeply divided along linguistic and ethnic lines, with the Anglophone/Francophone split the single most important cleavage.

    Taken as a description of the demographic composition of the capitalist class, Niosis argument is self-evident. The more important and difficult question, however, is whether these cleavages affect its behavior as a social class. While the similarities in the arguments of Naylor, Clement, and Niosi are apparent, there are important differences in their emphases. Also, they refer to different historical periods: Naylors theoretical argument is built around a narrative about the nineteenth and early twentieth century; Cle- ment focusses on the postwar period and most of his empirical analysis is concerned with the early 1970s; and Niosi deals with developments a t the beginning of the 1980s. Still, all three point to the importance of examining regional, ownership and industry divisions within the Canadian capitalist class. Comparative analysis of Canadian economic development, notably the work by Ehrensaft and Armstrong (1981) and Laxer (19851, is used to sup- port this model of distorted or truncated development.

    An attack on this viewpoint can be mounted from a consideration of the now extensive research on comparative development, nicely summarized by Carroll (1986: 17m, which reveals an enormous diversity. Underlying the exceptionalist arguments, Carroll argues, is a model of idealized, or at least typical, capitalist development which is portrayed by Canadian dependency theorists as involving transitions, first, from agriculture and primary pro- duction, and then to the intense industrialization of mature capitalism. Not only is this sequence atypical, it is clearly not the path followed by the United States, to which Canada is often implicitly compared (Singelmann, 1978).

  • 156 MICHAEL ORNSTEIN

    For the empirical analysis below, the question is whether the network of interlocks reveals the unusual weakness of Canadian capital, in the form of unusual fragmentation (perhaps resulting from the high level of foreign ownership) and the absence of major industrial corporations from the core of the network. Obviously, the view that Canadian economic development is not particularly unusual suggests that the Canadian network will also not be unusual.

    GENERAL MODELS OF THE CAPITALIST CLASS AND DIRECTORATE INTERLOCKS

    In his introduction to the 10 nation comparative study, John Scott (1985) describes five models of the organization of capital. Two of these models por- tray the division of large corporations into distinct, although not necessarily competing, groups of corporations centred around financial institutions (usually banks, but sometimes insurance companies or financial holding companies). The Marxist variant of this approach identifies these groups of corporations with the fusion of finance and industry, known as finance- capital, which is said to mark the highest, monopoly stage of capitalism. In the context of the finance-capital model, interlocking directorates iden- tify groups of corporations which are organized around, but not dominated by, the financial institutions at their centres; finance capital involves the fusion of industry and finance, not the control of industry by finance. The non-Marxist co-ordination and control model, in contrast, leads to the in- terpretation of the intensive interlocking among groups of corporations as a reflection of central, financial corporations (or, sometimes, family-con- trolled holding companies) domination of these corporate groups. Both models suggest that the interlock network will reveal cliques centred around powerful financial institutions and/or family holding companies; but, where the finance capital model suggests relatively egalitarian relations between finance and industry, the co-ordination and control model suggests that there will be evidence of financial (or family) control of industrial corpora- tions, presumably in the form of a much stronger propensity for the execu- tives of financial institutions to sit on the boards of industrial corporations than for the executives of industrial corporations to sit on financial boards.

    According to the resource-dependence model, interlocking directorates are used by corporations to order and control their relationships with cor- porations that constrain them. These inter-corporate constraints are actu- ally market relationships between industries, for which the most systematic evidence is in the form of input-output tables. The presence of interlocks is predicted to correlate with the strength of market relationships between in- dustries and/or individual corporations. The implication is that the network of interlocks will reflect dyadic relations between corporations, that it will be relatively sparse and without prominent centres. The network is also not likely to be hierarchical, since smaller and less powerful corporations have at least as much need for control of their environments as larger corpora- tions.

    The managerial and class cohesion models give rise to the predictions that there will be a relatively featureless, although hierarchical, network of

  • 157 SOCIAL ORGANIZATION OF CANADIAN CAPITALIST CLASS

    interlocks without discrete groups of corporations. From the managerial perspective, interlocks provide general information to corporate managers (enhancing what Useem, 1984 terms their environmental scan) as well as indicating a corporations prestige. From the class cohesion perspective, directorships provide communications within the capitalist class, which is conceptualized more broadly as the dominant social class.

    Scott (1985: 10-11) differentiates the class cohesion from the managerial model by arguing that the class cohesion model requires that

    the major structural feature of the network should be a separation bctwcen an inner circle (or corporate elite) or multiple directors and the bulk of directors. This inner circle epitomizes the relationship between social background and board membership and they are likely to be the brokers between business and the political system.

    I t is not clear, however, that there need be such a sharp distinction between single and multiple directors. Similarly, while many class theorists have stressed the inheritance of wealth in capitalism, nothing in the Marxist theory of capital accumulation necessitates restricted mobility into and out of the capitalist class. The validity of Marxist class theory should rest on evi- dence about whether it is possible to identify a common class interest of capi- talists and whether the project of this class involves the domination and ordering of society, as well as the control of individual corporations. Thus, on the basis of information about interlocking directorates alone, it is im- possible to distinguish between the class cohesion and managerial models of capital.

    Although these alternative theories lay emphasis on different aspects of the organization of capital, they are not strictly incompatible. It is easy to imagine individual capitalist classes displaying combinations (if not equal combinations) of the patterns predicted by two or more of these five mod- els. So i t is not surprising that the numerous studies of interlocking direc- torates provide some evidence to support each one of these theories of the organization of capital. For example, Burt (1983) shows that interlocks within u.S. manufacturing reflect market relations between industries, as predicted by the resource dependence model. Studies of interlocks between the 800 largest US. corporations by Sonquist and Koenig (1975) and between the 250 largest corporations by Bearden and Mintz (1985) reveal city- and regionally-based groups of corporations centred around major financial in- stitutions. Depending on whether these financial institutions are believed to control these groups, the findings are consistent with the finance capital or co-ordination and control models.

    Stokman and his colleagues found considerable diversity among the na- tions they studied. In the u S., Britain and France, groups of corporations (cliques) are centred around important financial institutions (banks in the U.S. and Britain and holding companies in France), but no strong centre in- tegrates the network. In the seven other nations the networks are more cen- tralized. Though in most cases the largest banks and/or holding companies

  • 158 MICKAEL ORNSTEIN

    act as prominent local centres, the national networks are unified by the ex- tensive overlaps between these spheres of influence. Two previous studies of the Canadian network, by Carroll (1986) and Carroll, Fox and Ornstein (1982) suggest that the Canadian network is much closer to the second, more unified, model. Carroll describes the network of ties among the largest 100 corporations in 19765 in these terms:

    capitalist interest groups are centred primarily in investment companies, built around intercorporate ownership relations and based in Montreal or Toronto. Al- though these interest groups are structurally discernible, they are themselves ex- tensively interconnected. Financial institutions are positioned particularly well in the network as articulation points between intercorporate groupings (1986: 156)

    While the highly clustered, poorly integrated networks in the u.s., Bri- tain and France conform to the predictions of the finance capital model, the more commonly observed combination of local centres with overall integra- tion appears to lend support to a combination of two theoretical models: the clusters are suggestive of the fusion of financial and industrial interests identified by the finance capital model (although some of the clusters also reflect control by families, regional concentrations, or industrial groupings), while the overall integration of the clusters into a larger network conforms to the predictions of the managerial and class cohesion models. This combi- nation is, however, more appropriately interpreted as favoring the manage- rial and class cohesion models over the financial capital model, since they suggest that there should be evidence of overall integration but do not pre- clude the existence of local clusters. The finance capital model, on the other hand, provides an interpretation of the clusters in the network, but does not identify a need for overall integration.

    The only previous comparative study of Canadian directorates is Cle- ments (1978) analysis of the density and patterns of interlocks among the dominant corporations - which were identified on the basis of their sales, assets and market shares (see Clement, 1975: 125ff.l - in Canada and the U.S. Surprisingly, in light of his theoretical arguments about the cleavage between the indigenous and comprador elites, Clement (1978: 166) found that the Canadian network of interlocks was denser than the U.S. network and that the relationship between manufacturing and finance was stronger in Canada than in the u.s.6 Unfortunately, such a comparison between Canada and the US., the most powerful developed capitalist nation, raises as many questions about the position of the Canadian capitalist class as it answers. In light of the idiosyncrasies of the American economy, such as the relative decentralization of banking and the regionally-centred character of the US. network of interlocks (Allen, 1974; Sonquist and Koenig, 1975) it is not clear how to interpet differences between Canada and the U.S. Peculi- arities of the American economy and capital could as easily account for Canada-us. differences as distortions of the Canadian economy. There is also some risk that Clements results represent a methodological artifact: his analysis is based on, what by his criteria, are 113 dominant Canadian

  • 159 SOCIAL ORGANIZATION OF CANADIAN CAPITALIST CLASS

    corporations and 194 dominant American corporations. Because the density of networks of interlocks is known to decline as the number of corporations under study increases, Clements study is biased in the direction of discover- ing, as he did, that the Canadian network is more densely connected.

    These theoretical arguments and previous empirical research suggest a number of questions for this empirical analysis of Canadian interlocks. Most obvious is the need to test the supposition - which follows both from the comparative research on the welfare state and from the arguments about the effects of economic dependency on Canadian capital - that the Canadian capitalist class is unusually fragmented and disorganized. Second, it is nec- essary to locate the Canadian network in the context of the alternative theoretical models of the organization of capital. And, third, it is essential to examine the positions of the major sectors of capital within the network, focussing on the major banks and other financial institutions and on the relative positions of domestic- and foreign-controlled corporations.

    DATA AND METHODOLOGY

    Following the model of the 10 nation collaborative project (Scott, 19851, this Canadian study includes the 50 largest corporations in the financial sector, ranked by assets, and the 200 largest corporations outside the financial sec- tor, ranked by sales. In the 10 nation study, allowance is made for the addi- tion of important corporations to and under some circumstances the deletion of corporations from this sample of 250 corporations. For Canada, the addition of six major property development corporations7 increased the study population to 256 corporations. These listings were all taken from the 1981 rankings carried out by the Financial Post. From public records it proved impossible to locate data on the composition of the boards of nine of these 256 co orations and they are assumed to have no links with the listed corporations.

    From a Canadian perspective, the 10 nations in the study by Stokman, et ai. are not the best possible selection. These nations are sufficiently varied to provide a good context for discussing the structure of Canadian capital, but one might hope for the inclusion of additional nations with populations and positions in the world economy more similar to Canadas, such as Australia, Sweden and Denmark.

    After selecting the corporations, there remains the question of which in- dividuals should be taken as representatives of each corporation. In Canada, and also in Britain and the US., this is not problematic, since formal control of a corporation rests with a single board, usually consisting of a mixture of insiders, who are executives of the corporation, and outsiders, who are not. Most European nations, however, have more complex, two-tiered boards. In Austria, Germany, the Netherlands and Switzerland, the execu- tives of a corporation appoint an executive board and the shareholders elect a supervisory board, while in Belgium, Finland, France and Italy an ad- ministrative board represents the managers and an auditing board, which is appointed by the shareholders, has the limited responsibility of oversee- ing the corporations financial affairs. These alternative forms of two-tiered

  • 160 MICHAEL ORNSTEIN

    boards are referred to, respectively, as the German and Latin forms of boards. Based on an analysis of the division of labor between these boards, the comparative study included both groups on the German boards, but only the administrative members of the Latin boards.

    ANALYSIS

    This section is divided into three parts. The first deals with the density and other general characteristics of the interlocks between corporations, the sec- ond considers the relationships between corporations in different sectors of the economy and the third examines the distribution of directorships among individuals. The first and third parts of this section provide precise compari- sons between Canada and all 10 nations in the comparative project, but the comparisons in the second part are less systematic.

    Relationships Between Corporations In Canada, and all 10 other nations, most of the 250 largest corporations are joined in a single network; that is, groupings within the network are not sufficiently marked to break it into distinct pieces. In all but three of the nations, there are small numbers of corporations that are isolated from the central network but have at least one tie with another corporation that is also isolated from the central network. In Canada there are only two such corporations. There are significant numbers of corporations which are completely isolated, in the sense that none of their board members also holds a position on another board in the sample. As Table I indicates, 50 of the 256 Canadian corporations are isolated - a number which is close to the middle of the range defined by the ten nations. With, respectively 24,27,30 and 44 isolated corporations, the US., Finland, France and Switzerland ex- hibit higher levels of connectedness than Canada, while Germany, the Netherlands, Britain, Belgium, Italy and Austria have lower levels of con- nectedness (ranging from 53 isolated corporations for Italy, to 90 for Austria). There is a suggestion of a curvilinear relationship between national population and the number of isolated corporations: higher levels of connectedness appear to reflect either the very large size of corporations in the biggest nations (as in the US. and France) or the social proximity of corporations in very small nations (Finland and Switzerland). A number of other nations (particularly Germany, with 62 isolates), however, do not con- form to this pattern.

    Partly reflecting these differences in the number of isolated corporations, there is considerable variation in the density of the national networks. In Canada, 4 per cent of the unique pairs of corporations are actually directly linked by one or more common directors. Although this density level appears to be quite low, remember that the number of unique links between pairs of 256 corporations - all of which would have to exist for the density to reach 100 per cent - is over 32,000. In addition to the directly linked corporations, 27 per cent of all the pairs of Canadian corporations are linked indirectly through one other corporation, that is they are both linked via the board of

  • TAB

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    20

    4 14

    7 18

    2 18

    5 21

    0 22

    0 19

    5 18

    0 19

    0 20

    6 22

    6

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    50

    90

    80

    61

    27

    30

    62

    53

    56

    44

    24

    T

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    num

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    256

    241

    270

    250

    237

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    247

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    1.20

    1.

    31

    1.20

    'Exc

    ept

    for

    Can

    ada,

    dat

    a are

    from

    Sto

    kman

    , Zie

    gler

    and

    Sco

    tt. 1

    985:

    25-

    27

  • 162 MICHAEL ORNSTEIN

    some third corporation. Counting both direct and indirect ties Canada ranks second after Finland among the 11 nations.

    Naturally, nations with more isolated corporations tend to have lower in- terlock densities, although the relationship is not perfect: for example, while Canada has more than twice as many isolated corporations as the u.s., the overall density of the Canadian network is considerably higher. Britain, with only 2 per cent of all possible pairs of corporations directly linked and 12 per cent indirectly linked, stands out as having the lowest interlock density.

    Since isolated corporations lower the density of the network, it makes sense to provide an alternative measure of network density of ties which ex- cludes the isolated corporations (and also excludes the small number of cor- porations in small components which are unconnected to the largest component in the network). After adjusting for the number of isolated cor- porations, the 6 per cent of the possible ties in the largest component of the Canadian network actually exist. By this standard, Canada is near the middle of the range of densities among the ten nations.

    In analyses of interlocking directorates it is also common to distinguish primary ties, which involve an executive of one of the linked comporations from secondary ties, which do not. Secondary ties may be further sub- divided according to whether or not they involve an executive of another corporation in the network. According to Stokman and Wasseur (1985: 39), the balance among the three types of ties is indicative of the relative importance of relationships between individual corporations, which are pri- marily reflected in primary ties, and the networks role in the more general economic and political co-ordination of capital, which is best served by direc- tors with many positions but no primary allegiance to one corporation. Secondary ties may be subdivided into two categories according to whether they are induced by primary ties, that is whether they link two corpora- tions which have primary links with a third corporation. Clearly, secondary ties that are not induced by primary ties are the ones most likely to serve the general interest of the corporations in the network.

    Table I shows that 179 out of 204 Canadian corporations which are in- cluded in the largest component of the network, are also included in the largest component of the network defined on the basis of the primary ties alone. Thus the cohesion of the Canadian network does not depend on pro- fessional directors, who are not executives of any of its member corpora- tions. In this respect, Canada is typical. Only in Britain, where just 84 of the 250 British corporations have any primary tie, is the network of primary ties much smaller than the overall network. Of course, there can be dense networks of both primary and secondary ties - and in Canada, this proves to be the case. Thirty per cent of the interlocks between Canadian corpora- tions involve primary ties, another 27 per cent are induced by those primary ties and 43 per cent of the ties do not involve a primary tie. Again Canada is near the middle of the range of the wide range distributions of types of ties: in France, the Netherlands, Switzerland and the U S . , (uninduced) in- direct ties account for half or more of all the links between corporations,

    11

  • 163 SOCIAL ORGANIZATION OF CANADIAN CAPITALIST CLASS

    while in Austria, Belgium and Britain the corresponding proportion is about 25 per cent.12

    Finally, Table I provides some further information on the relative impor- tance of ties linking particular pairs of corporations, in the form of the frequency distribution of the multiplicity of ties, that is the distribution of the numbers of ties between unique pairs of corporations. Links involving two or more interlocks, like primary ties, are not likely to have occurred by chance. Eight-two per cent of the links between Canadian corporations in- volve a single common director, 13 per cent involve two directors, 3 per cent involve three directors, and 2 per cent involve four or more directors. Canada is again near the middle of the range where, at one extreme, 94 per cent of British ties involve only one director and only 2 per cent involve three or more directors, and in Belgium and Italy, by contrast, about 15 of all the links between corporations involve three or more directors.

    The findings of this general comparison between the Canadian and the 10 other networks are strikingly consistent. The high degree of foreign ownership and other peculiarities of Canadian capital clearly have not re- sulted in an unusually fragmented network. Depending on the criterion em- ployed, Canada falls in the middle of the range of variation among the 10 nations. The American and British networks are very weakly integrated, while the Canadian pattern is more similar to those exhibited by a number of European nations, including France and Germany, which are certainly not undeveloped and dependent. Of course, these findings do not prove that weaknesses of Canadian capital, such as the high level of foreign con- trol, do not decrease the integration of the network, only that there are there must be compensating factors for any such effects. In the next section, an examination of the relations within Canadian capital addresses this issue.

    Intersectoral Differences For this analysis the corporations were initially divided into the financial, non-financial, and property development sectors. The Canadian-controlled non-financial corporation are divided into five groups: management con- trolled public companies; corporations controlled by identifiable individu- als or family groups; federal Crown corporation^;'^ provincial Crown corporations; and a remainder consisting of corporations with identifiable, but non-family, owners of a controlling interest (termed non-family con- trol in Table 11). The foreign-controlled non-financial corporations were divided according to whether control rested in the US., Britain, or elsewhere. The financial corporations were divided only into Canadian- and foreign- controlled. Beca se there are only six development corporations these were not subdivided.

    From Table 11 it is immediately apparent that there are striking differ- ences between the 11 categories of corporations. First, the foreign control- led corporations are much more likely to be isolated from the network: among the non-financial corporations, 31 of the 71 US. corporations are iso- lated, as are 3 of the 14 British corporations and 1 of the 8 from other na- tions; 3 of the 14 foreign financial corporations are also isolated. These

    I!!

  • TABLE

    I1

    NU

    MBE

    R O

    F Tl

    ES A

    ND D

    ENSI

    TY O

    F TI

    ES B

    ETW

    EEN

    ELE

    VEN

    IND

    UST

    RY B

    Y O

    WN

    ERSH

    IP C

    ATE

    GO

    RIE

    S

    Non

    -Fin

    anci

    al C

    anad

    ian

    Cor

    pora

    tions

    N

    on-F

    inan

    cial

    For

    eign

    F

    inan

    cial

    Sec

    tor

    Prop

    erty

    W

    idel

    y-

    Fam

    ily-

    Fed

    eral

    Pr

    ou.

    Non

    -fan

    . C

    orpo

    ratio

    ns

    Deu

    elop

    - he

    ld

    Con

    trol

    C

    row

    n C

    row

    n co

    ntro

    l A

    mer

    ican

    B

    ritis

    h O

    ther

    C

    anad

    ian

    For

    eign

    m

    ent

    Den

    sity

    'of

    Tie

    s N

    on-F

    inan

    cial

    Can

    adia

    n C

    orpo

    ratio

    ns

    Wid

    ely-

    held

    Fa

    mily

    con

    trol

    Fe

    dera

    l C

    row

    n Pr

    ovin

    cial

    Cro

    wn

    Non

    -fam

    ily c

    ontr

    ol

    Non

    -Fin

    anci

    al F

    orei

    gn

    Cor

    pora

    tions

    A

    mer

    ican

    B

    ritis

    h O

    ther

    Fina

    ncia

    l Sec

    tor

    Can

    adia

    n Fo

    reig

    n

    Prop

    erty

    Dev

    elop

    men

    t

    Num

    ber

    of c

    orpo

    ratio

    ns

    Num

    ber

    of c

    orpo

    ratio

    ns

    292 95

    31

    52

    84

    57

    37

    400

    16

    69

    30

    53

    61

    35

    57

    23

    12

    6

    48

    11

    0 0

    70

    31

    63

    31

    314

    135

    106

    53

    31

    20

    12

    12

    42

    83

    28

    42

    16

    36

    6 12

    77

    28

    10

    20

    20

    13

    53

    26

    10

    71

    150

    59

    49

    115

    186

    8

    5 5

    27

    42

    2

    48

    12

    0 21

    10

    6 24

    0

    38

    71

    13

    n 36

    14

    6

    outs

    ide

    the

    mah

    com

    pone

    nt

    1

    2 0

    4 3

    31

    3

    1

    2 3

    1

    Mean n

    umbe

    r of

    ties

    w

    ith o

    ther

    cor

    pora

    tions

    29

    .1

    13.8

    12

    .5

    6.5

    15.3

    6.

    4 5.

    9 12

    .1

    30.3

    4.

    3 11.3

    *The

    entr

    ies are

    equa

    l to

    the

    num

    ber

    of in

    terl

    ocks

    bet

    wee

    n co

    rpor

    atio

    ns in

    the

    two

    cate

    gori

    es d

    efin

    ed b

    y th

    e ro

    w a

    nd c

    olum

    n of

    the

    tabl

    e di

    vide

    d by

    the

    num

    ber

    of u

    niqu

    e pa

    irs

    of c

    orpo

    ratio

    ns, m

    ultip

    lied

    by 1

    000

  • 165 SOCIAL ORGANIZATION OF CANADIAN CAPITALIST CLASS

    findings are not unusual: for Austria, Ziegler, Reissner and Bender (1985: 82) find that 30 of the 60 foreign-controlled corporations are isolated and for Belgium, Cuyvers and Meeusen (1985: 155) report that half of the 108 foreign-controlled corporations are isolated. Although US. corporations make up just over one-quarter of all the corporations in the sample, 62 per cent of the isolated corporations are American. Besides the foreign-control- led corporations, only among the provincial Crown corporations is a signif- icant proportion (4 out of 12) entirely outside the network.

    Of course the proportion of isolated corporations is a crude measure of their attachment to the network, so Table 11 also gives the mean number of ties between the corporations in each category and all other corporations in the network. With means of 29.1 and 30.3 ties, respectively, the widely-held Canadian non-financial corporations and the Canadian financial corpora- tions have about twice as many ties as any other group. This finding, which is consistent with a number of previous studies (Ornstein, 1976; Carroll, Fox and Ornstein, 1982; Carroll, 19861, demonstrates that it is not the Canadian financial corporations alone which dominate the network, but a mixture of Canadian non-financial and financial corporations. The similarity of the mean numbers of ties conceals a large difference in their variances. The five big banks had an average of 85 ties, so that the mean number of ties of the remaining 31 Canadian financial corporations was oniy 21.4; the five non- financial corporations with the most interlocks had an average of 54.6 in- terlocks.

    It is interesting to compare the most central corporations in Canada and the U.S., which for 1962 are gwen by Mintz and Schwartz (1985: 150). Of the 20 American corporations with the most interlocks, 12 are banks, five are insurance companies, two are railways and one is a manufacturer. Mizru- chi (1982: 67) and Bearden and Mintz (1985: 234ff.l show that this pattern of bank domination of the network extends from the turn of the century to the present. In Canada, the top 20 included seven banks, three insurance companies and 10 non-financial corporations. Not only is the prominence of Canadian banks not unusual in comparison with the US., but Ziegler (1985) demonstrates that Canada is quite similar in this respect to a number of other national networks, notably those of Switzerland, the Netherlands and Germany - all of which have only three or four dominant banks. In Eng- land, Scott and Griff (1985: 219) show that nine of the 10 corporations with the highest adjacency (i.e., links to the greatest number of other corpora- tions) are banks.

    In an intermediate group with between 11.3 and 15.3 ties per corporation are the Canadian family and non-family controlled corporations, federal Crown corporations, non-family controlled corporations, other foreign non-financial corporations and development corporations. Least integrated into the network are the provincial Crown corporations, American and British non-financial corporations, and foreign controlled financial corpora- tions, with means between 4.3 and 6.5 interlocks. Of course, the presence of a large number of isolated corporations in a category decreases the mean numbers of interlocks in that category. Adjusting the means to eliminate

  • 166 MICHAEL ORNSTEIN

    the effect of isolated corporations produces only one major change in the mean number of interlocks: the mean of American controlled non-financial corporations increases from 6.4 to 11.4 interlocks. Thus, American corpora- tions are more likely to be isolated; but those which are not isolated are only somewhat less likely to be connected to the network than their Canadian counterparts.

    In Table 11 the density of ties between the various categories of corpora- tions is given by the number of interlocks between each pair of categories divided by the number of unique pairs of corporations (multiplied by 1000, for convenience). For example, the density of ties between widely-held and Canadian financial corporations is equal to 314, which is equal to the num- ber of ties between the two categories of corporations (181) divided by the number of possible pairs which can be formed out of the 16 widely held cor- porations and 36 Canadian financial corporations (576, or 16 times 361, mul- tiplied by 1O0O.l6 This value is actually one of the largest in the Table. There are two other large, important values: the density of ties between pairs of widely held Canadian non-financial corporations is 292; and the density of ties between pairs of Canadian financial corporations is 186 - these are mostly ties between banks and trust and insurance companies, since the banks are forbidden to interlock with each other. Thus there are very dense ties within the widely-held non-financial corporations and between them and the Canadian financial sector. Except for the provincial crown corpora- tions, the Canadian financial corporations have strong ties with all the types of Canadian controlled corporations and with development corporations.

    Using a larger number of corporations (256 versus 100) and more recent data, this analysis provides strong confirmation of Carroll, Fox and Orn- steins (1982) and Carrolls (1986) findings that, at the centre of the network are the largest, Canadian controlled financial and industrial corporations. While the five big banks have the most interlocks, a number of large in- dustrial corporations immediately follow them in ranking. This finding is clearly at odds with the predictions of the co-ordination and control model of interlocks, in which large financial institutions are seen as being at the centres of competing spheres. In the context of Canadian political economy, the findings raise doubts about the domination of mercantile capital.

    Both family-controlled and non-family-controlled non-financial Cana- dian corporations - the two categories of corporations for which it is possible to locate an individual or corporate controlling interest - have much fewer ties than the mana ement-controlled corporations whose ownership is widely -distributed! Combined with our findings about the relative isola- tion of foreign-controlled corporations, this suggests that corporations which are controlled by their managements (as are all the Canadian banks and a number of the major insurance companies) make the greatest use of the network. Confirming this argument is the finding that corporations with family or corporate controlling interests are more likely to have outgoing than incoming primary ties - in other words, their directors are more likely to serve on the boards of other corporations than are outsider executives to sit on their boards.

  • 167 SOCIAL ORGANIZATION OF CANADIAN CAPITALIST CLASS

    Foreign-controlled corporations lower the integration of the network and, in their absence, the Canadian network would be more highly inte- grated than the networks of all 10 other nations. Foreign corporations do not, however, form an alternative centre. The largest group of foreign-con- trolled non-financial corporations, those owned in the US., exhibits exceed- ingly weak internal ties (the density of ties between pairs of these firms is only 10); it has much stronger ties with Canadian corporations. Instead of forming an alternative, competing centre, as Clement and Niosi suggest, the foreign-controlled corporations are peripheral to a network dominated by the largest Canadian corporations.

    Corporate Directors No analysis of the network of interlocks between corporations can be complete without consideration of the individuals whose membership on two or more boards constitute the links between the corporations. While there is necessarily a relationship between the characteristics of the net- work, just examined, and the distribution of positions among the directors, it is far from perfect. For example, because the number of links formed by an individual varies as the square of the number of positions he or she holds, small differences in the distribution of positions among individuals can re- sult in very different network structures. Of course it is these directors who provide the link between capital - understood as the collectivity of capitals identified with corporations - and the capitalist class, the collectivity of in- dividuals which controls capital and whose class interests involve not only control of the accumulation process itself, but the existence and reproduc- tion of the larger complex of institutions which constitute capitalist society.

    By definition an analysis of the individuals who link pairs of corporations is restricted to multiple directors, whose interests cannot be entirely iden- tified with a single corporation. At issue in the international comparison are differences in what might be termed the autonomy of the corporate network, that is the extent to which the network can be said to represent more than the interests of individual corporations. Compared to individuals with only two positions andlor inside directors, individual directors with positions on three or more boards and who are not executives of one of the corporations in the network are better able to serve the general interest of the corpora- tions.

    According to the measures of network autonomy in Table 111, the Canadian network is among the most autonomous. The ratio of positions to directors, 1.39, is slightly higher than the ratio observed in all the other 10 nations. In terms of the proportion of directors with two or more positions (relative to directors on the board of only one corporation), Canada, along with France and Switzerland, ranks highest. With 464 multiple directors Canada ranks second in the number of multiple directors, behind Finland and the U.S., both with 564. Twenty-two per cent of the Canadian multiple directors occupy 3 positions, 13 per cent occupy 4 positions, 7 per cent oc- cupy 5 positions and 5 per cent occupy 6 or more positions. In these terms, Britain and the U.S. are exceptional: only 1 per cent of the British and Amer-

  • TABL

    E 11

    1 D

    ISTR

    IBU

    TIO

    NS

    OF

    DIR

    ECTO

    RS

    AN

    D P

    OSI

    TIO

    NS

    Can

    ada

    Aus

    tria

    B

    elgi

    um

    Bri

    tain

    F

    inla

    nd

    Fra

    nce

    Ger

    man

    y It

    aly

    Net

    herl

    ands

    Sw

    itzer

    land

    U

    SA

    Num

    ber

    of p

    osit

    ions

    3205

    Num

    ber

    of d

    irec

    tors

    2298

    Rat

    io o

    f pos

    itio

    ns

    to d

    irec

    tors

    1.39

    Num

    ber

    of m

    ulti

    ple

    dire

    ctor

    s 464

    Prop

    ortio

    n of

    mul

    tipl

    e di

    rect

    ors

    0 0.20

    Num

    ber

    of b

    ig li

    nker

    s

    118

    Num

    ber

    of n

    etw

    ork

    spec

    ialis

    ts

    40

    Num

    ber

    of p

    osit

    ions

    Tw

    o 53

    held

    by

    mul

    tipl

    e T

    hree

    22

    dire

    ctor

    s Fo

    ur

    13

    (per

    cent

    ages

    ) Fi

    ve

    7 Si

    x or

    Mor

    e 5

    Total

    100

    Num

    ber of

    inte

    rloc

    ks

    Tw

    o

    14

    car

    ried

    by

    dir

    ecto

    rs T

    hree

    17

    wit

    h di

    ffer

    ent n

    os. o

    f in

    terl

    ocks

    (p

    erce

    ntag

    es)

    Four

    69

    Tot

    al

    100

    2939

    2430 1.21

    271 0.11

    50

    11

    65

    17 9 4 4

    100 14

    11

    75

    100

    3000

    2203 1.36

    373 0.17

    92

    28

    57

    19 9 6 8

    100 10

    10 81

    100

    3091

    2682 1.15

    282 0.11

    27 4 69

    21 6 3 1

    100

    33

    30

    37

    100

    4178

    3110 1.34

    564 0.18

    110 41

    61

    20 6 6 7

    100 15

    15

    70

    100

    2625

    1931 1.36

    378 0.20

    80

    42

    60

    19 9 6 6

    100 17

    16

    67

    100

    4727

    3943 1.20

    420 0.11

    82

    32

    60

    20 9 5 6

    100 16

    16

    69

    100

    2358

    1737 1.36

    322 0.19

    65

    16

    63

    17 7 5 8

    100 14

    13

    73

    100

    2950

    2321 1.27

    357 0.15

    68

    34

    64

    17 8 6 5

    100 19

    16

    65

    100

    3681

    2999 1.23

    405 0.20

    56

    31

    67

    19 6 2 6

    100 21 17

    62

    100

    3976

    3108 1.28

    564 0.18

    69

    39

    64

    24 8 3 1

    100 28

    31

    41

    100

    *Exc

    ept f

    or C

    anad

    a, d

    ata are

    from

    Sto

    kman

    , Zie

    gler

    and

    Sco

    tt, 1985: 22-24

  • 169 SOCIAL ORGANIZATION OF CANADIAN CAPITALIST CLASS

    ican multiple directors have six or more positions, compared to at least 4 per cent in the other nations. Stokman and Wasseur (1985: 23) suggest that the structures of the boards might account for this difference, since, among the 10 nations in the comparative study only Britain and the U.S. had single board systems. The addition of the Canadian case, however, shows that there is no necessary relationship between board structure and the distribu- tion of directorships.

    The distribution of the numbers of positions held determines the relative contribution to the network of individuals with different numbers of posi- tions. Again because the number of interlocks created by an individual var- ies as the square of the number of positions he or she holds, individuals with large numbers of positions contribute disproportionately to the network. Al- though in every nation more than half of all multiple directors occupy just two positions, these directors are responsible for an average of only 20 per cent of all ties. In Canada, the 25 per cent of all multiple directors who oc- cupy four or more positions - labelled big linkers by Stokman et al. - ac- count for 69 per cent of all interlocks. In this respect Canada is quite similar to eight of the 10 other nations; only in Britain and the US. do the occupants of four of more positions account for less than 60 per cent of all ties. Trans- lating these percentages into numbers, we find that 118 individuals account for more than two-thirds of all the interlocks between the largest Canadian corporations. Among the 10 nations, the number of big linkers varies from only 27 in Britain to 110 in Finland, with the mean about 80.

    Stokman and Wasseur also distinguish network specialists who have positions on the boards of the (four or more) corporations, but are not ex- ecutives of any these corporations. Because the network specialists have no primary affiliation with a corporation in the network, they may play a special role in unifying a system which is subject to cleavages reflecting the interests of economic sectors and individual corporations. Again there is wide international variation. In Britain, there are only four such network specialists, while the Canadian, Finnish, French, and American networks include about 40.

    Turning from the interlocks between corporations to the distribution of positions among individuals it is apparent again that the Canadian network more closely resembles the networks of the eight continental European na- tions than the networks of the U.S. or Britain, which is quite the opposite of what would be predicted from arguments about Canadian exceptionalism. In Canada, there is a very cohesive network, which is tied together by a rela- tively small number of individuals with many board positions.

    CONCLUSIONS

    The analysis indicates that the Canadian inter-corporate network is not un- usually fragmented, that there are no pronounced cleavages between in- dustrial and financial capital or between foreign and domestic capital, and that industrial capital is neither subordinated nor peripheral to finance. The Canadian network looks like the networks of a number of other countries, such as Germany and France, about which it is impossible to advance argu-

  • 170 MICHAEL ORNSTEIN

    ments about dependency and underdevelopment. Paradoxically, it is the networks of the U.S. and Britain which are atypically fragmented. While, as a means of studying the organization of capital, there are limitations to fo- cussing exclusively on interlocks, these findings are very damaging to the claims about the fragmentation and distortion of the Canadian capitalist class.

    In terms of the more general questions about the organization of Canadian network, the analysis lends support to the models of capitalist class relations which emphasize unity and not the formation of discrete, potentially competing centres. As argued above, our data cannot be used to decide between the managerial and class cohesion models of capital. The strong relationships between corporate size and numbers of interlocks sug- gest that influence in the network is a reflection of economic power. The finding that the corporations most closely identified with individual capital- ists - the family-controlled non-financial corporations - are less integrated than the management controlled corporations is clearly at odds with an in- terpretation of the class cohesion model which emphasizes the role of in- heritance and family relations. Rather than ruling out a class model, however, these findings suggest that the capitalist class can be character- ized by considerable mobility. That the capitalist class is capable of gaining and integrating new recruits does not, however, make it less of a social class, (although it is further evidence against Porters and Clements characteri- zation of Canada as a low mobility society).

    Whatever the strengths of the resource dependency model of the network - and a much more extensive analysis would be required to assess these ef- fects - it is apparent that this model cannot explain the main features of the Canadian network. I t is not clear how to account for the effect of ownership on interlocking within the resource dependency framework, since in that framework interlocks are conceived as reflecting efforts to deal with exter- nal threats from other corporations. A further obstacle is posed by the very large number of interlocks involving financial corporations - because they supply capital, financial corporations are, in a way, dependent on all other corporations. Finally, it is difficult to account for the strong, positive rela- tionship between corporate size and interlocking in the context of resource dependency theory. Within an industry, the vulnerability of a corporation to competition should not be a positive function of size; smaller corporations should be more vulnerable than their larger counterparts and should there- fore require more interlocks.

    If the structure of the Canadian network is not particularly unusual, Canada is an exception to the association between network centralization and corporatism observed by Ziegler. Although in terms of the relatively slow development of the welfare state Canada resembles the U.S. and Bri- tain, in terms of the network of corporate interlocks Canada resembles the more corporatist European nations. Of course, Canada conforms to the pat- tern identified in the social democratic model of the welfare state: the weak- ness of corporatism and slow development of the Canadian welfare state is correlated with the relative weakness of the Canadian labor movement and

  • 171 SOCIAL ORGANIZATION OF CANADIAN CAPITALIST CLASS

    of the national and most provincial social democratic parties. As well as lend- ing support to this model, the Canadian findings suggest an interpretation - or rather limitation - of the association between the development of the welfare state and the social organization of capital. As Panitch and others have noted, the development of the welfare state requires, and perhaps brings about, the organization of capital. The relative disorganization of capital in the U.S. and Britain suggests that without corporatism a highly concentrated network of interlocks is unlikely to develop. But this analysis of the Canadian network demonstrates that a strong interlock network can develop in the absence of corporatist pressures.

    On the methodological side, this study demonstrates the risks of gener- alizing on the basis of a small number of national cases. For example, Stokman, et al. (1985: 28) find that:

    Four countries had only a small number of isolated corporations and a large com- ponent of 200 or more corporations: the u.s.A., France, Finland and Switzerland. The small numbers of isolated corporation was mainly due to the relatively small numbers of subsidiaries of foreign enterprises among the selected corporations in these countries. In all countries these subsidiaries tended to bc isolated or only very loosely connected with their corporations.

    But Canada is clearly an exception. Although foreign controlled-corpora- tions are peripheral to the Canadian network, by a variety of different quan- titative standards, the Canadian network is among the most densely integrated.

    The Canadian case also proves disturbing for another generalization sug- gested by the 10 nation study. One apparent source of variation among na- tions is the organizational form of the board itself. The two nations whose corporate networks are most distinctive (and least integrated) are Britain and the US. , which alone among the 10 nations have single corporate boards to perform the functions which in the eight other nations are divided be- tween two boards. Scott (1985: 17) describes these single boards as meeting frequently and regularly to take responsibility for determining and moni- toring corporate strategy. The suggestion is that the Anglo-American board system encourages a focus on the needs of individual corporations and dis- courages interrelations between them. In Canada the single board system is accompanied by a very high degree of corporate integration.

    Summarizing the results of the 10-nation study, Ziegler (1985: 267) con- cludes,

    I t has sometimes been said about studies of interlocking directorships that they have resulted again and again in the same finding: the vast majority of corporations are tied into a large component, with the biggest companies and especially the financial institutions most densely connected. Despite this expecta- tion, the great variations found among the ten nations studied are striking.

  • 172 MICKAEL ORNSTEIN

    In the context of these great variations, the Canadian network is among the most centralized and dense. This characteristic of the Canadian network cannot be the result of some simple difference between Canada and the 10 other nations. For example, the Canadian network is denser than the net- works of some larger nations (Britain, Italy and the US.) and some smaller nations (Belgium, the Netherlands and Switzerland). That this high degree of centralization has brought high levels of foreign ownership, resource de- pendency, low levels of research and development, etc., is unarguable - but these weaknesses do not develop out of a distorted, finance-dominated or fragmented capitalist class.

    NOTES

    The Canadian research includes Porter (1965: 298ff.); Barkans and Puppo (1974); Cle- ment (1975); Coleman (1986); Langille (1987); and Ornstein (1988). The outstanding American work is by William Domhoff (1979; 1980; 1983). Some key works in this tradition include Korpi (1978; 1983); Castles (1978); Bjorn (1979); Korpi and Shalev (1979a; 1979b); Stephens (1979); and Hollingsworth and Han- neman (1982). For an interesting effort to reconcile inconsistencies among these studies see OConnor and Brym (1988). Two good summaries of these arguments are presented by Brym (1985: 3ff.l and Carroll (1986: lff.). This point is taken up first by MacDonald (1975) and Moore and Wells (1975) and then by a number of other scholars, who argue that Naylor incorrectly classifies the transpor- tation sector as mercantile. Of course, in Volume 3 of Capital. Marx clearly classifies transportation as a part of industrial capital. The more difficult question, however, is not whether Naylor (who does not claim to be an orthodox Marxist) misuses Marxist theory, but whether there are unusually strong links between finance and transporta- tion in Canada and whether this has any relationship to the extent and nature of Canadian economic development. Developments after 1981, which is the year to which the data discussed in this paper per- tain, suggest the emergence of family centred groups in a network which earlier studies describe as relatively undifferentiated (Francis, 1986). Surprisingly, in view of the stronger links between finance and manufacturing in Canada, Clement (1978: 167) concludes: In Canada elite members in the sphere of cir- culation are thoroughly integrated with each other but have tenuous connections with the sphere of production, which is foreign controlled. In both Canada and the U.S. the trade sector, which is also part of the sphere of circulation, is relatively weakly linked to other sectors of the economy. The six are Cadillac Fairview Corp., Nu-West Development Corp., Daon Development Corp., Oxford Development Group Ltd., Trizec Corp. Ltd. and Campeau Corp. A more detailed consideration of the sampling issues should also consider the problem of ranking of corporations. The decision to select the largest 50 financial corporations, ranked by assets, and the largest 200 non-financial corporations, is arbitrary in a num- ber of respects. First, the appropriateness of the 50:200 ratio of financial to non-finan- cia1 corporations in the sample depends on whether the 50th largest financial corporation and the 200th largest non-financial corporation are roughly comparable in economic importance. Of course, this depends on both the relative importance of these two sectors of the economy and on the degree of concentration in each - both of which are known to vary across nations. Second, within the non-financial sector, the decision to rank the firms by sales, rather than by assets, tends to exaggerate the importance of

  • 173 SOCIAL ORGANIZATION OF CANADIAN CAPITALIST CLASS

    corporations and industries whose sales are high relative to their assets. Reasonably, both a corporations sales and its assets are indicators of its importance in the economy. This is why corporations in the commercial sector, including department and food store chains and large-scale wholesalers are usually quite peripheral to the network of inter- locks - both their assets and their profits are small relative to their sales. At the op- posite extreme, extractive industries (especially when commodity prices are low) and utilities tend to be underrepresented in rankings based on sales. Because the number of interlocks of a corporation is known to vary strongly with cor- porate size, there is a potentially expensive, but not arbitrary solution to the problem of determining the optimal size of a sample of corporations for network analysis. As the number of corporations selected becomes larger and, therefore, each new selection be- comes smaller, the number of interlocks added declines. Sooner or later, the new cor- porations add little or nothing to the network. If data on a sufficiently large number of corporations are available it is possible to determine where the network ends - or a t least reaches some lower limit of density. Thus the nature of the sample is determined empirically, rather than being arbitrarily specified as some round number.

    9 All but two of the nine were foreign-owned corporations with highly centralized manage- ment, they include CIL Inc., Kraft Inc., PCL Construction Ltd., Pratt & Whitney Aircraft of Canada Ltd., Chevron Canada Ltd., Rockwell International of Canada Ltd., Coca-Cola Ltd., Eaton Yale Ltd., and Oxford Development Group Ltd. Since it is extremely unlike- ly that these corporations would have large numbers of ties with other firms in the net- work, the addition of their directors would do very little to influence the present findings.

    10 For this analysis and subsequent discussion of corporations executives, the chair of the board is included among the executives, on the ground that the position of the chair is usually a full-time employee of the corporation and is intimately involved in its opera- tion. A very small number of primary ties are non-directional in that they involve in- dividuals who hold executive positions (or one executive position and the chair of another board) on two different corporations.

    11 There is considerable controversy over the relative strength of primary and secondary ties (for opposing views see Ziegler, 1985: 281 and Ornstein, 1984), there is general agree- ment that primary ties are indicative of a stronger relationship between corporations, since executives are in a much stronger position than outside directors to influence the behavior of a corporation.

    12 Given that in four of the ten nations in their study secondary interlocks unassociated with primary ties are responsible for at least half of all ties, it is surprising that Stok- man and Wasseur (1985: 43) should conclude that: the contours of an overall national network were determined by the pattern of its primary interlocks ... The primary inter- locks can, therefore, be interpreted as the skeleton around which the body of a network is formed and which thus determines its shape (1985: 43). This interpretation suggests a prejudice in the direction of an inter-organizational inter- pretation of the network.

    13 These corporations are identified as management-controlled because their shares were widely distributed, according to the Financial Post.

    14 For convenience, if not consistency, following the Financial Posf classification, the Federal Business Development Bank (a federal crown corporation) is classified with the Canadian financial corporations.

    15 Although these 11 categories may appear to be a bit disorderly, the more log.lcal, com- plete classification of industries by ownership would have too many empty cells to be usable.

    16 Note that because two or more interlocks may occur between a given pair of corpora- tions, this ratio may exceed l and it tends to overstate the proportion of all pairs of cor-

  • 174 MICHAEL ORNSTEIN

    porations which have at least one link. Correcting for the multiplicity of ties would do little to change the pattern in Table 111.

    17 Of course it is possible that this effect of ownership might reflect size differences be- tween the groups of corporations in the various ownership categories. A regression analysis (not presented here) showed that controlling for size - measured by both assets and sales - lowered the difference by only about one third.

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