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

Maria Guadalupe, Hongyi Li, Julie Wulf

NBER Working Paper No. 17846
Issued in February 2012
NBER Program(s):Corporate Finance, Labor Studies, Productivity, Innovation, and Entrepreneurship

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."

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w17846

Published: Maria Guadalupe & Hongyi Li & Julie Wulf, 2014. "Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management," Management Science, vol 60(4), pages 824-844. citation courtesy of