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Abstract
This article analyses the evolution of corporate networks in Argentina and Italy from 1913 to 1990, using an interlocking directorates technique applied to six benchmark years and the largest 25 banks and 100 non-financial companies in both countries. The descriptive statistics of the companies and directors in the sample provide input for a network connectivity analysis of the two systems, integrated with historical and structural analyses. Furthermore, this article provides the first assessment of syndics – special auditors for firms – to the network analyses. Relying on a recently established analytical framework, the authors show that the Argentine and Italian corporate networks exhibit different structures and evolutions over time. This research broadens the extant analytical framework by exploring how syndics contribute to corporate networks and how the interaction of macro, meso, and micro levels affects the evolution of syndicatures in the two countries. Finally, the detailed taxonomy of syndics offers evidence of companies’ selection strategies and the historical uses of syndicature as a governance mechanism.
Acknowledgements
We would like to thank two anonymous referee and the associate editor of this journal, Abe De Jong, for their valuable comments. We also wish to thank all the participants to the Session “Business Networks: a Quantitative Perspective” of the 11th International Congress of the Spanish Association of Economic History (AEHE) held in Madrid (September 2014) for their precious suggestions.
Notes
1. David and Westerhuis, The Power of Corporate Networks. A Comparative and Historical Perspective The analysis of corporate interlocks has its origin in modern sociology and has gained, in recent decades, significant traction in all social sciences, including economics and economic and business history. This approach can serve a dual function: complementing traditional case study methods while also offering broad overviews of the corporate systems under investigation, which help verify different theoretical perspectives. The need to introduce new methodologies and integrate more economic, business, and social history also has been stressed by Jones, van Leeuwen, and Broadberry, ‘The Future of Economic, Business and Social History’.
2. David and Westerhuis, ‘Comparing Corporate Networks in a Long-Term Perspective’.
3. The board of syndics is fundamentally an auditing board; its function does not coincide with those of the supervisory board in the German system of corporate administration.
4. Rinaldi and Vasta, ‘Persistent and Stubborn: The State in Italian Capitalism, 1913–2001’; Lluch and Salvaj, ‘Longitudinal Study of Interlocking Directorates in Argentina and Foreign Firms’ Integration into Local Capitalism (1923–2000)’.
5. Countries such as Chile, Brazil, and Colombia did not introduce syndics for example. Argentina did so after the 1889 Reform, following the 1882 Italian Code.
6. Scott, ‘Theoretical Framework’.
7. It is worth noting that both major international research projects on corporate networks that take comparative perspectives focus only on directors and do not include syndics in their analyses of Latin countries. See Stokman, Ziegler and Scott, Networks of Corporate Power. A Comparative Analysis of Ten Countries;David and Westerhuis, The Power.
8. Watts and Zimmerman, ‘Agency Problems, Auditing, and the Theory of the Firm: Some Evidence’.
9. Schulze, Lubatkin, Dino and Buchholtz, ‘Agency Relationships in Family Firms: Theory and Evidence’.
10. Jensen and Meckling, ‘Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure’.
11. Watts and Zimmerman, ‘Agency Problems’.
12. Fauri, Il Piano Marshall e l’Italia.
13. Felice and Vecchi, ‘Italy’s Modern Economic Growth’; Vasta, ‘Italian Export Capacity in the Long-Run Perspective 1861–2009: A Tortuous Path to Stay in Place’.
14. Felice and Vecchi, ‘Italy’s’.
15. López, ‘Multinational enterprises’.
16. Barbero, ‘Business Groups in Nineteenth and Twentieth Century Argentina’.
17. Taylor, ‘Capital Accumulation’.
18. That decade ended in hyperinflation; Argentina’s annual inflation rate reached a 3,058 per cent peak in 1989. See Jones and Lluch, ‘Argentine and Chilean Business in the Second Global Economy’, Table 9.2.
19. The criteria for the selection of the top 100 non-financial firms are set out in Appendix 1.
20. Hay, ‘Internal Control: How it Evolved in Four English-Speaking Countries’; Praquin, ‘Commercial Legislation and the Emergence of Corporate Auditing in France, 1856–1935’.
21. Jensen and Meckling,‘Theory of the Firm’.
22. Boockholdt, ‘A Historical Perspective on the Auditor’s Role: The Early Experience of the American Railroads’.
23. Watts and Zimmerman, ‘Agency Problems’. In the United States, railroad companies in the 1840s and 1850s relied on auditors to investigate fraud and verify account balances, as well as to report on the company’s financial status to stockholders. See Boockholdt, ‘A Historical Perspective’.
24. Teti, ‘Imprese imprenditori e diritto’.
25. Halperín, Manual de Sociedades Anónimas.
26. Rossi Cimmino, Funciones de los síndicos y fiscalización oficial de las sociedades.
27. Teti, ‘Imprese’.
28. De Luca and Verrilli, Dizionario economico finanziario e contabile. Corredato da riferimenti normativi, confronti interdisciplinari e profili delle maggiore società italiane.
29. Rivarola, Sociedades Anónimas; Halperín, Manual.
30. For example, ‘In our country, it is common practice to appoint as receivers, or trustees, business figures who do not have the necessary preparation in accountancy, economic and administrative technicalities, legislation, and who, very often, lack the required time due to their numerous occupations. They accept these positions sometimes out of commitment, sometimes for self-adornment, allowing the directors and managers to free themselves from the substantial concerns this custodianship entails’, Rossi Cimmino, Funciones, p. 51.
31. Similar to international research on corporate networks with a comparative perspective, we define marginal firms as those of with degree 1 or 2, such that they are interlocked with one or two other firms. See David and Westerhuis, The Power.
32. This trait seems common to most capitalist nations; nearly all countries experienced an erosion of their corporate networks in the final decades of the twentieth century. A key explanatory factor seems to be a change in banks’ strategy, such that they disengaged from industrial companies as they moved from traditional lending toward fee-based businesses, especially investment banking. This changing strategy was closely linked the effects of globalisation and financial deregulation, which deeply affected the banks’ activities. See David and Westerhuis, The Power.
33. The increase in the syndics’ network connectedness in 1952 was probably a consequence of the enactment of the 1942 Civil Code that imposed more constraints on syndics’ professional qualifications. As a result, we observe, after that year, an increase in the percentage of multiple syndics, from 17.2 per cent in 1936 to 25.1 per cent in 1952. In subsequent benchmark years, it never fell below 20 per cent.
34. Inter-board interlocks are generated by individuals (syndics–directors) who sit on more than one company, in positions as either syndics (in some companies) or directors (in some other companies).
35. Lluch and Salvaj, ‘Longitudinal Study’; Sommi, Los capitales alemanes en la Argentina.
36. ‘The Railway Gazette’, 1920, p. 199.
37. Conti and La Francesca, Banche e reti de banche nell’Italia postunitaria.
38. Rinaldi, ‘Entrepreneurs and Managers (1913–1972)’.
39. Lluch and Salvaj, ‘Fragmentación del empresariado en la época de la industrialización por sustitución de importaciones (ISI) en la Argentina: Una aproximación desde el estudio de la red corporativa (1954–1970)’.
40. Who’s who in Latin America. Argentina, Paraguay and Uruguay, 1950.
41. Lluch, Salvaj and Barbero, ‘Corporate Networks and Business Groups in Argentina in the Early 1970s’.
42. Gerschenkron, Economic Backwardness in Historical Perspective.
43. Confalonieri, Banche miste e grande industria in Italia 1914–1933, vol. I and vol. II.
44. La Francesca, Storia del sistema bancario italiano.
45. Colli, Rinaldi and Vasta, ‘The Only Way to Grow? Italian Business Groups in Historical Perspective’.
46. Rinaldi and Vasta, ‘The Italian Corporate Network after the ‘Golden Age’ (1972–1983): From Centrality to Marginalization of State-Owned Enterprises’.
47. Barbero, ‘Business Groups’.
48. Lluch and Salvaj, ‘Longitudinal Study’.
49. Rodríguez, La sindicatura: proposiciones relativas a su reforma en la legislación argentina.
50. Belini and Rougier, El Estado empresario en la industria argentina.
51. Belini, La Industria Peronista. Políticas públicas y cambio estructural, 1946–1955.
52. In contrast, in neighbouring Chile, the state played an important role in fostering networks of Chilean capitalism. See Salvaj and Couyoumdjan, ‘“Interlocked” Business Groups and the State in Chile (1970–2010)’.
53. Lluch and Salvaj, ‘Longitudinal Study’.
54. Barbero, ‘Business Groups’.
55. Conversely, in the United States and the United Kingdom, shareholders’ auditors were replaced by professionals much earlier, and this change was not promoted by law but rather by companies’ need to respond to market pressures. See Watts and Zimmerman, ‘Agency Problems’.
56. Bucheli, Salvaj and Kim, ‘Non Market Strategies during Transitions: The Case of Chile’.
57. Imita.db is one of the largest data sets for joint stock companies with a historical perspective. For details, see Vasta, ‘Appendix’. The database is available online: http://imitadb.unisi.it
58. Data for companies, boards of directors, and boards of syndics are available for 1911, 1913, 1921, 1927, 1936, 1952, 1960, 1972, and 1983; for balance sheets, time series are available for the spans from 1900 to 1971, 1982 and 1983.
59. The threshold was set at one million Italian lire until 1940, with the sole exception of 1914, when it was set at 500,000 lire. In 1952, the threshold was raised to 10 million, then to 25 million in 1956, 50 million in 1961, and 100 million from 1964 through 1972. For 1983, the threshold was raised to 2 billion lire.
60. For 1983, there are not enough official data on the representativeness of the sample. According to a recent estimate, such a weight could reach 83.3 per cent of the total of Italian joint stock companies. See Cerise, ’apporto’.