Commercial Banks, Interlocking Directorates and Economic Power: An Analysis of the Primary Metals Industry

Abstract

This paper addresses the issues of corporate control and bank power by analyzing relations between commercial banks and firms in the primary metals industry. We construct three models of corporate control: management control, single bank control, and collective bank control. We test the validity of these models for the primary metals industry by comparing (1) frequencies and distributions of bank-corporate interlocks and bank-trust department stockholdings; and (2) relationships between bank interlocks and measures of relative short-term debt and dividend payout rate. Our results support none of the models fully but lend partial support to the collective bank-control model. Two additional approaches to the study of economic powerthe resource dependence perspective and the class cohesion perspective-are then discussed and suggestions made for further research. Corporations, and the managers and stockholders that govern them, have enormous power in our society (Bell, 1973); yet our knowledge of how corporations function, and of how they cooperate and compete, is severely limited (Useem, 1979, 1980). The ability of commercial banks and bankers to influence non-financial corporations is one important area that requires more research. This paper constructs and evaluates different models of economic power, with special emphasis on the influence they attribute to banks. To this end, we examine the frequency with which firms in an important U.S. industry (primary metals) maintain interlocking directorates