Oligarchic Control of Mutual Organizations
Many years ago I participated in a Wharton School study of the savings and loan industry, my assignment being to analyse their control and conflict of interest problems. My contribution to this multi-volume project, sponsored and published by the Federal Home Loan Bank Board, was a small volume entitled Conflict of Interest in the Savings and Loan Industry. The industry did not like this book at all, and held a special press conference to denounce its claims of extreme managerial control, nepotism, and serious and threatening conflicts of interest.
At that time, the S & L industry was dominantly mutual in structure, supposedly controlled by its member depositors/borrowers rather than owner-shareholders seeking maximum profits, as in stock companies. The insurance industry was also mainly organized in the same way. But what I found was that as the S & L industry grew, and the firms increased in size, all vestiges of mutual control disappeared and the firms fell under the control of small management groups that succeeded themselves and replenished their numbers without any significant involvement of the mutual members. They held annual meetings each year by law, but nobody came but the officers--one large California association head enjoyed telling me the story that after 20 straight years of zero attendance, a little old lady showed up, who was given the privilege of reading a congratulations to the officers for a job well done!
These mutual bosses gradually came to feel that it was their organization to do with as they pleased; nepotism was rampant, and many of these organizations had affiliates into which they could channel insurance, title, and other "side-car" businesses. Control was also sometimes sold by the managements to outsiders, invariably in some devious way as control was not the management's to sell, in principle. Through these processes, however, massive conflicts of interest were built-in to the industry that contributed to the ultimate debacle of rip-offs and failures. All that crookedness and misuse of resources was rooted in the fact that these supposedly nonprofit organizations were not being run by or in the interests of their mutual owners but for the interests of the self- perpetuating oligarchs who had gained control and were able to sustain it through undemocratic processes.
This oligarchic tendency is linked to the growth in size, the difficulty of getting the many mutual owners together, their diminished interest in the organization with increased size and delocalization, the self-interested behavior of the oligarchs, and the absence of any machinery containing the oligarchs and decentralizing power and decisionmaking. In the S & L industry the oligarchs gave out minimal information to the mutual owners about the issues facing the organization, and otherwise actively discouraged involvement. With large structures, a democratic organization requires a deliberate decentralization of organizational power and assured rights in decisionmaking of all participants--job holders and audiences as well as top managers.
This brings us to the Pacifica crisis, where in a fresh phase the Pacifica management has now fired the popular KPFA manager Nicole Sawaya in an "internal management decision," made as usual without the slightest regard for the views of local employees or audiences. The Pacifica case is one in which an increasingly active membership confronts an authoritarian oligarchic leadership that will not bend and insists on redefining the mission of the organization by top down decisions. It continues to resist any restructuring that would democratize decisionmaking, brazenly insisting on the preservation of its inherited oligarchic rights. Perhaps it is looking toward a sale of control in the classic mode of the pirates of the savings and loan industry; but perhaps it is only an ingrained authoritarian habit. In either case, this leadership fits well the traditional model of oligarchic control long established in the savings and loan industry.