CORPORATE POWER AND CONTROL: THE CASE OF LEASCO CORPORATION VERSUS CHEMICAL BANK*

Extensive research and theoretical analyses have been done in an effort to identify the location and source of corporate power. This case study of a corporate relationship between a financial firm and a nonfinancial firm supports the idea of levels of control and power (Pahl and Winkler, 1974), and the notion of power as a relationship and a process (Zeitlin, 1976). Control of capital flows is a fundamental source of corporate power, more important than the ability to vote on the basis of stock ownership, managerial discretion, and corporate board interlocks. Previous research on power relationships, ownership, and control of modern corporations suggests five models of analysis: 1) The managerial model of corporate control argues that wide-spread stock dispersal allows managers to effectively control a corporation by owning or controlling as little as five percent of that firm's stock (Berle and Means, 1967; Burch, 1972; Larner, 1970). It presumes managers and owners have different interests, producing significant differences in the behavior of the firm: firms controlled by managers are expected to seek only moderate profits; those controlled by owners seek maximum profits (Bell, 1973; Berle and Means, 1967; Burnham, 1941; Dahrendorf, 1957; Galbraith, 1967; Gordon, 1945; Kaysen, 1957). Isolating the modern corporation from all other corporations, the managerialist model examines the internal structure of corporations and the role of management, boards of directors, and stock ownership as bases of power. It presumes that the voting rights attached to stocks is a crucial locus of power. Berle and Means (1967) saw the board as the locus of power; later studies thought corporate control was passing to the managers (particularly as Burnham's definition of 'manager' came to mean technocrats and bureaucrats rather than directors and chief executive officers). This suggests outside members on the board (including those representing financial corporations) were little more than figureheads. Inequality and conflict among corporations are not addressed by the managerialist model, which examines only the internal structure of the corporation and assumes that control of the firm is internally generated. 2) The inter-organizational model assumes that corporate power is derived from the right to vote on the basis of stock ownership (Allen, 1974; Herman, 1973; Levine and White, 1960; Litwak and Hylton, 1962; Scott, 1978; Simon, 1957; Thompson, 1967; Thompson and McEwen, 1958). Board members are "symbols to be held accountable" to stockholders (Pfeffer and Salancik, 1978:18). As such, they may be fired as scapegoats and replaced by stockholders unhappy with the corporation's performance. However, inter-organizational theorists do not accept the managerialists' restricted focus on the internal structure of the firm. They examine the interrelationships between corporations, both financial (banks and insurance firms) and nonfinancial (industrials, retailers, transportation firms, etc.). They assume equality of power of all participants in a given relationship and the separation of ownership and control. They argue that managers try to achieve only moderate profits because of uncertainties in the environment and within the organization. That is, managers are constrained more than owners because the board and stockholders can hold them accountable. 3) The resource dependence model is a version of the inter-organizational model; it assumes