Ethnic Affinity and Division in the Management of Major Firms

No systematic study has been done until now on the impact of ethnic differences within the senior management of major Quebec-based firms.

Owing to the theoretical and practical importance of the headquarters executive group, the problem of ethnically based differences deserves special attention. Generally speaking, it is the possession of considerable holdings which potentially guarantees a person a place on the board. As a result, members of the dominated ethnic group can rise to the top positions in the firm only through promotion from within. To be precise, because of the interpenetration of the board and senior management, the directors must enjoy the full confidence of the board — a confidence based not only on objective data relating to a long record of service out but also on affinities corresponding quite closely to Weber's notion of elective affinity. Such affinities are very common within the same ethnic group. This explains the phenomenon of "inbreeding" in Québec. Elective affinity may be interpreted as confidence and trust in a particular individual, and this involves a certain risk. Therefore, as the degree of affinity decreases, so the level of perceived risk is higher. In other words, in a multiethnic situation, an officer with an ethnic background different from than that of the owners of capital presents a risk. That is, he creates some degree of uncertainty concerning the overall performance expected from him and, therefore, represents a possible loss of control. Elective affinity serves to reduce risk. The desire to maintain control consequently involves an ethnic cost, and the need for community of thought and action at the highest strategic level in the firm constitutes a barrier preventing members of an ethnic group other than the one holding control from acquiring greater power.

However, this barrier is not uniform: the officers play different roles giving them different kinds of power. If an executive from an ethnic group other than that of the capital owners is in a position with few, if any, powers, he presents a smaller risk than if he holds a position providing him with a strategic power of control.

From a list of all the officesmaller risk than if he holds a position providing him with a strategic power of control.

From a list of all the officers (767) in the 67 Quebec-based industrial and fînancial concerns that are among the 300 largest in Canada, some statistically significant differences have been established:

i) between Anglophone and Francophone firms, regarding the proportion of Francophones in the executive group; this reflects the phenomenon of inbreeding (internal recruitment) and ethnocentricity at the senior management level;

ii) between major Canadian firms and foreign subsidiaries, regarding the proportion of Francophones;

iii) between Canadian and foreign firms, regarding the proportion of foreigners in the executive group; this reflects a strong desire to maintain control on the part of foreign owners of capital;

iv)between Anglophone and Francophone firms and between Canadian and foreign-controlled firms, regarding the proportion of Francophones with positions giving them strategic power of control; this reflects the impact of ethnically based differences on the distribution of power within senior management between an ethnic group enjoying elective affinity with the group owning the firm's capital and an ethnic group with little, if any, affinity with the capital-owning group. Generally, Francophones have positions of this kind in Francophone concerns.

The relationship between ownership and management — specifically the close link between the distribution of power within the headquarters executives and ethnic background of its members — has been brought out in this study.

This relationship has been elucidated with the help of the notions of uncertainty and risk as they relate to Weber's concept of elective affinity. The desire to maintain control leads to a desire to minimize uncertainty and, hence, to the recruitment of officers who present as little risk as possible and who, accordingly, come from the same cultural background as that of the controlling group. A member of an ethnic group other than the capital-owning, or controlling group must negotiate an entry barrier in order to join the executive — precisely because he belongs to a different ethnic group.

The desire to maintain control tends to restrict potential access to executive positions both quantitatively and qualitatively: representatives of an ethnic group other than the one in control are brought in on a distinct and different basis, and they are not given positions carrying strategic power of control.