Revenge of the managers: Labor cost-cutting and the paradoxical resurgence of managerialism in the shareholder value era, 1984 to 2001

Institutional changes associated with the rise of shareholder value capitalism have had seemingly contradictory effects on managers and managerialism in the United States economy. Financial critiques of inefficient corporate bureaucracies and the resulting wave of downsizing, mergers, and computerization subjected managers to unprecedented layoffs during the 1980s and 1990s as firms sought to become lean and mean. Yet the proportion of managers and their average compensation continued to increase during this period. How did the rise of anti-managerial investor ideologies and strategies oriented toward reducing companies' labor costs coincide with increasing numbers of ever more highly paid managerial employees? This article examines the paradoxical relationship between shareholder value and managerialism by analyzing the effects of shareholder value strategies on the growth of managerial employment and managerial earnings in 59 major industries in the U.S. private sector from 1984 to 2001. Results from industry-level dynamic panel models show that layoffs, mergers, computerization, deunionization, and the increasing predominance of publicly traded firms all contributed to broad-based increases in the number of managerial positions and the valuation of managerial labor. Results are generally consistent with David Gordon's (1996) fat and mean thesis.