Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management

35 Pages Posted: 16 Jun 2012

See all articles by Maria Guadalupe

Maria Guadalupe

INSEAD - Economics and Political Sciences; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Hongyi Li

UNSW Australia Business School, School of Economics

Julie Wulf

Harvard Business School

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Abstract

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."

Keywords: communication, organizational design, functions, centralization, M-form, hierarchy, top management team, information technology, activities, diversification

JEL Classification: J24, J33, L25, D22

Suggested Citation

Guadalupe, Maria and Li, Hongyi and Wulf, Julie M., Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management. IZA Discussion Paper No. 6635, Available at SSRN: https://ssrn.com/abstract=2085222

Maria Guadalupe (Contact Author)

INSEAD - Economics and Political Sciences ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Hongyi Li

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Julie M. Wulf

Harvard Business School ( email )

Harvard Business School
Boston, MA
United States

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