Doctoral Dissertation Research: Shareholder Value and the New American Workplace: Investor-Driven Downsizing, 1980-2007)

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SES-0926934Frank DobbinJiwook JungHarvard UniversityEven before the current economic meltdown, waves of downsizing, starting in the late 1970s, had swept corporate America, eroding workers' expectations of economic security. But not only did downsizing become more prevalent during this period; its basic nature changed. Previously, firms had cut jobs temporarily, to adjust the size of their workforce during a downturn. Since the late 70s, firms have increasingly cut jobs in both good and bad times, and without any intention of hiring workers back. This dissertation research examines the mechanisms driving this new downsizing: it analyzes both downsizing announcements and actual implementation of the announced downsizing plans. The co-PI will examine announcements from more than 700 large U.S. corporations between 1980 and 2007, and detailed post-announcement information about workforce size and composition, obtained from the annual reports that establishments submit to the Equal Employment Opportunity Commission. Current findings show that at work in the new downsizing is a shift in ideology, from an emphasis on corporate growth and conglomeration to an emphasis on profitability and shareholder value, an ideology that both reflects and intensifies an increased influence of shareholders and the financial sector generally on firm behavior. The research advances the existing literature on corporate downsizing by focusing on the mechanisms behind downsizing, rather than its impact on corporate performance (as most economic studies have done). By analyzing both announcement and implementation of downsizing, the research is able to examine discrepancies between the two, in a way that studies focusing one on or the other cannot. As a broader implication, the research speaks to the new public concern, after the financial system meltdown, about the relationship between that system and employment. By elucidating the pre-history of the current situation and the mechanisms by which the financial sector influences employment, and assessing the magnitude of the influence empirically, the research helps lay a rational groundwork for the current heated discussions about regulating the financial sector.