Corporate Governance and Nested Authority: Cohesive Network Structure, Actor-Driven Mechanisms, and the Balance of Power in American Corporations

Corporate governance describes practices that allocate power and control within public corporations, especially between shareholders, the board of directors, and managers. Shareholder value norms have replaced earlier managerialist governance models. Concurrently, cohesion among the managerial corporate elite has declined, further contributing to a declining managerialist governance consensus. This study considers how governance orientations in publicly held corporations are nested within interfirm networks. Drawing on prior theory, the author argues that cohesive substructures among the corporate elite help account for the surprising resilience of managerial control. He finds that more cohesive subgroups in the board interlock network have greater managerial control and shows how cohesive substructures emerge out of local actor-driven mechanisms: (1) directors affiliated with managerialist firms select into dense groups, (2) firms appoint directors from similarly governed firms, and (3) interlocks help spread governance orientations. These findings have implications for theory and research on collective action in corporate governance.