Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management
This paper shows that top management structures in large US firms radically changed since the mid-1980s. While the number of managers reporting directly to the CEO doubled, the growth was driven primarily by functional managers rather than general managers. Using panel data on senior management positions, we explore the relationship between changes in executive team composition, firm diversification, and IT investments--which arguably alter returns to exploiting synergies through corporate-wide coordination by functional managers in headquarters. We find that the number of functional managers closer to the product ("product" functions i.e., marketing, R&D) increase as firms focus their businesses, while the number of functional managers farther from the product ("administrative" functions i.e., finance, law, HR) increase with IT investments. Finally, we show that general manager pay decreases as functional managers join the executive team suggesting a shift in activities from general to functional managers--a phenomenon we term "functional centralization."
Document Object Identifier (DOI): 10.3386/w17846
Published: Prev Volume 60 Issue 4, April 2014, pp. 824-844 Next Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management Maria Guadalupe INSEAD, 77300 Fontainebleau, France; and Centre for Economic Policy Research, London EC1V 3PZ, United Kingdom email@example.com, Hongyi Li Australian School of Business, University of New South Wales, Sydney NSW 2052, Australia firstname.lastname@example.org, Julie Wulf Harvard Business School, Harvard University, Boston, Massachusetts 02163; and National Bureau of Economic Research, Cambridge, Massachusetts 02138 email@example.com
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