The ‘Managerial Revolution’ is Over: They Won?

“Income Data Services, which totted up pay, bonuses and various share awards, says the average FTSE 100 executive director pocketed a 49 per cent rise in the last financial year to bring their remuneration to £2.7m a year. Chief executives had to make do with a 43 per cent rise, poor lambs.”

James Moore, The Independent, 28 Oct 2011.

This week I was teaching one of my MBA classes about ‘power in and around organizations’, which was also the title of a book written by the academic Henry Mintzberg back in 1983. Thirty years ago Mintzberg concluded that most of the evidence suggested that the power of senior management within corporations has massively expanded and that it was now they, rather than the technical owners – i.e. shareholders – who really controlled the organizations.

What Mintzberg did not say, because at that point it wasn’t quite so obvious, was that having seized power it was only a question of time before the new corporate ruling class also started to seize the money.

According to the High Pay Commission, an independent pressure group in the UK, “Executive pay in the UK has rapidly increased in the past 30 years, after remaining relatively flat in the preceding 30 years.” Between 2010 and 2020, on current trends, they forecast pay of the Chief Executives of the FTSE 100 companies to increase from 145 times average wages to 214 times.

The analyses of the increasing power of the ‘managerial class’ of course goes back a long way before Mintzberg in 1983. Back in 1942 a former Trotskyist called James Burnham wrote a seminal book called “The Managerial Revolution” in which he forecast the transition from a bourgeois society, where owners of capital were the ruling class, to a ‘managerial society’, where a class of managers became the de facto ruling elite. For Burnham both the Soviet East and the capitalist West were undergoing this transition to a ‘managerial society’, albeit from different starting points.

During the 1990s there was a partial rearguard action by the owners of capital in the form of the ‘shareholder value’ movement, attempts to improve ‘corporate governance’, and other reforms to protect the interests of shareholders against the increasingly predatory power of elite managers. How far they succeeded can be partly judged by the trend in top executive salaries.

It is tempting to argue that what we have seen in the past 3 decades has been the final triumph of this transition. There are those that argue that ‘managerialism’ has become the dominant ideology of our times, with the massive global growth of business schools, MBAs, management books and magazines, and so on. The increasing influence of the ‘managerial class’ within many western Governments and public administrations, has been well recorded, as has the increase in the ‘revolving door’ between politicians and civil servants on the one side and business managers on the other.

So is what we are witnessing in executive pay merely the final installment in Burnham’s ‘Managerial Revolution”? Having got the power, the new managerial elite now want the rewards too? Perhaps it is not quite so ‘simples’ as that, but……

3 thoughts on “The ‘Managerial Revolution’ is Over: They Won?

  1. Absolutely nothing,
    On reading James Burnhams, book “The Managerial Revolution,” This was the basis of 1984, Brave New World etc, we watched the films, laughed and said, “its only Science Fiction, it won’t happen,”
    Well James Burnham was the most under exposed yet influential man the world as known, his book was the text book for all to see, if they wanted to.
    So just go back to sleep, it is all over now.

  2. Interesting to see how this analysis plays out in local government where i work – a debate about the extent to which senior officers pay and power has risen over the last thirty years would be intriguing.

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