Employers’ Associations Research Paper

Employers’ associations are representative voluntary organizations—i.e., they are led by elected leaders and managed by professional managers—with a permanent staff for the administration of associational activities and the delivery of associational services, a budgetary process for the acquisition of funds and the accountability of their use, and a set of specific criteria defining the rights and duties of members. They can be analyzed in terms of their organizational properties, i.e., the domain of representation, the internal structure, the resources, and the tasks performed, and in terms of their degree of organizational complexity and relative autonomy. As formal representative organizations, they differ from other forms of organizations working for business, like clubs, law firms, and public relations agencies, as well as from more informal types of business association.

Business is a powerful pressure group in contemporary society, and employers’ associations are just one of the four major ways by which businessmen can exert power and influence, both individually and collectively, and both in the market and in the political arena. At the level of the individual firm, entrepreneurs and managers play a crucial role through investment, production, and employment decisions in the market—which shape the economic and political environment of government policies—and through lobbying and other forms of pressure politics. Collectively, businessmen can exert power in the market through agreements for controlling prices, market sharing, the allocation of raw materials, and in the political arena through collective political action by its own specific representative organizations. In fact, in spite of social cleavages and cultural differences among entrepreneurs, and in spite of the different roles they play in diverse organizational settings (large and small businesses, private and public firms, local firms, and multinational corporations), the business class often acts today as an organized collective actor through its own specialized representative organizations. Why does this happens? Or, in other words, why should capital owners and top executives, who possess the discretionary power to invest, develop a need for collective interest representation?

Historically, there have been three main reasons by which employers may be brought to politicize their interests and to form organizations. The first is that their power to invest can be challenged by workers’ unions. In most historical instances, business efforts to organize and coordinate actions came as a response to prior attempts by workers to pursue their interests by collective mobilization. Employers’ associations have concerned themselves with assuring a stable and reliable labor force, and with the setting of shared rules of the game in labor disputes in order to institutionalize class conflict. Trade unions have become their most important institutional partners.

A second reason for entrepreneurs to organize have been the attempts to avoid cut-throat competition on the market, to prevent—or at least limit—the access of foreign competitors to the domestic market, to form a common front vis-a-vis the suppliers of basic resources. In fact, while free competition is a basic feature of capitalist market economy, competition, when pushed too far, can generate crises and contradictions which threaten the viability of the system as a whole. Formal coordination rather than that spontaneously created by the market may be necessary through associational activity and through government action.

The last remark leads to the third main reason for employers to organize, i.e., the systematic effort to influence government economic policies: resistance to decisions which either limit the freedom to invest, or aim at redistributing wealth, or tend to increase the state direct intervention in key productive sectors. Democracies are consensus-bound, and competing political parties try to win the electoral support of social groups larger than business through fiscal, welfare, and other interventionist policies aimed at economic redistribution. Such policies are feared by employers because, directly or indirectly, they may threaten their discretionary power to invest, and consequently, they stir a political reaction which often takes the form of business interest organizations.

These three reasons have combined in various ways in different historical contexts to foster business associability. However, since, as will be argued later, greater power in the market place goes together with greater difficulties in producing collective benefits, collective political action for business can be defined as a second-best choice (Martinelli 1991). Whereas, in fact, labor can exert power only through collective organization, capital can exercise power also if not collectively organized. Capital can to some extent release itself from its dependence on labor through technical change, but labor cannot release itself from its dependence on capital for employment. Since, while it involves considerable risks and uncertainties, collective action does not grant capital owners similar competitive advantages as economic action in the market place, business interests become politicized whenever the power to invest is no longer sufficient for them to realize their economic interests. Associate action is therefore a second-best solution.

1. The Status Of The Research On Employers’ Associations

Research on business and employers’ associations is much less developed than research on the working class and trade unions, in spite of early movements to the contrary. As early as 1907, at the first meeting of the German Sociological Association, Max Weber argued for assigning a very high priority to the systematic study of patterns of associations in general and to the associative activities of business in particular, which he considered a significant new form of collective action. Descriptions of the political role of specific firms and individual entrepreneurs, and references to the working of business associations as part of general pressure groups studies, do exist; but specific studies on the strategies, organizational structures, resources, activities, and attitudes of associations devoted to the promotion and protection of employer and trade interests have been rare (Ehrmann 1957, Linz and De Miguel 1966).

Only in the last two decades of the twentieth century has the study of business interests associations been developed through the collective research work of a group of political scientists and economic sociologists (Schmitter and Streeck 1981, Lehmbruch 1984, Offe and Wiesenthal 1985, Windmuller and Gladstone 1985, Grant 1987, Sisson 1987, Coleman 1988, Martinelli 1991, Sadowski and Jacobi 1991). Research focused on business associability both in national systems and in industrial sectors was mostly framed in the paradigms of neocorporatism and/organized pluralism.

A set of related research questions have been studied. The question of why should capital owners and top executives, who possess the discretionary power to invest, develop a need for collective interest representation, has already been discussed; three further sets of questions have been addressed by recent comparative empirical research. The first concerns the distinctive character of business associability, i.e., the ways in which entrepreneurs and managers form an interest group different from others, and what is specific about it. The second focuses on the logic of membership, i.e., what organizational arrangements are required, given the basically individualistic and competitive structure of business interests, for entrepreneurs and managers to be able to associate with each other and to form collective interest organizations. The third set of research questions focuses on the logic of influence, i.e., what is the role of employers and business associations in policy making, both in policy advocacy and in policy participation. In all these questions the main dependent variables are the organizational dynamics, and the strategies that business interest associations develop, both in their relations with their members, and with outside groups and institutions, for their collective action to be successful.

1.1 The Distinctiveness Of Employers’ Associations

In contemporary poliarchies business is a privileged interest; it differs from other interests because it can exert power directly through individual pressures or by collective organized action of business interest associations; and, indirectly, because of the crucial role entrepreneurs and managers exercise over production, investment, and employment decisions. The specific nature of entrepreneurs’ collective action can be better appreciated by contrasting it with that of workers. As Offe and Wiesenthal (1985) argue, unions and business associations are different, because their respective collective actions are based upon two different logics. Unions’ collective action is more complex, since the definition of collective interests of individual workers results from their interaction in the union; this leads to an ongoing contradiction between bureaucracy and internal democracy, aggregation of individual interests, and formation of a collective identity. Business associations have an easier task: they represent a pure form of individualistic rationality, because each member can perceive individually what is his interest, and the association’s task is only the coordination of individual behaviors into the most effective strategy. Besides, labor has no alternative modes of collective action, whereas business has.

This view has been criticized, because it underestimates the problems of organizing business (Schmitter and Streeck 1981). Business and employers’ associations cannot be seen only as tools of market rationalization. Besides problems similar to those of unions, they have to confront further specific problems rooted in the diversity of economic sectors. Collective action for entrepreneurs is not easier; on the contrary, it is more difficult than for workers for three major reasons. First, business associations must organize actors who normally compete with each other and have less incentive to cooperate than workers. Second, entrepreneurial culture considers competition a core, legitimate value, whereas for workers it is often seen as a violation of the value of class and group solidarity; while an entrepreneur who pushes his competitors out of business is recognized by other entrepreneurs as an example of efficiency and success, a worker outbidding a fellow worker to get his job runs the risk of being ostracized for disloyalty and breach of solidarity. Third, business associations have to organize a range of interests wider and more complex than unions; their members are both buyers and sellers of factors of production, goods and services.

For these reasons, the problem of producing collective political benefits, as well as selective benefits in the form of specialized services for members, should be even more pronounced and more visible for employers than for workers.

1.2 Relations With Members And The Logic Of Membership

As any representative organization, employers’ associations must, first of all, be able to recruit members and win their allegiance and support. The task is not an easy one, first, because collective political action for business is second best, a choice to be taken only when the discretionary power to invest is no longer sufficient to realize its economic interests.

Second, this task is not easy because Olson’s theory of the logic of collective action applies to employers’ associations even more cogently than to other large interest groups. Why should a rational entrepreneur, belonging to a large group (where the link between the contribution of the single participant and the outcome of the action is very weak, as it is in an industrial labor dispute), bear the cost of the action—as in the case of lost production because of a strike—when he can benefit from it without participating in it? This is the reason why employers and business interest associations develop a wide array of activities and services, such as legal and fiscal assistance, constant information about laws and regulations, professional education and specialized training, and so on, which are used as selective benefits aimed at fostering continuing membership.

Third, business and employers’ associations in the relations with their members face another fundamental problem, i.e., the management of diversity. Some potential conflicts between their members are due to competition, while others arise from relations of mutual exchange. In fact, the more homogeneous a business association is with regard to its membership, the stronger is likely to be the competition among its members in the market. On the other hand, the more heterogeneous a business association, the greater the diversity of interests involving rates of exchange between different functional areas or sectors of the economy (Schmitter et al. 1980).

The management of diversity can be achieved through organizational development, defined in terms of the capability to organize complexity and to obtain relative autonomy from the state. Comparative research has shown that employers and business associations are the more effective the more developed and encompassing they are in scope and purpose; the more external effects and interdependences they are able to internalize; the more specialized and coordinated they are internally; the greater is their control over their environment; the more safely their supply of strategic resources is institutionalized; and the greater is their autonomous capacity to act and to pursue long-term strategies regardless of short-term environmental constraints and fluctuations. The logic of membership requires an articulated organizational structure that is capable of adapting to fragmented and segmented interests, and of fostering internal social cohesion and awareness of common interests among its members. The management of the relations between the association and its members depends on the specific demands and perceptions, on the number and dimensions of firms belonging to a given economic sector or region, the location of firms, and the degree of competition of the relative markets, and the degree of interdependency among firms; all variables which can foster tensions between individual and collective interests, and which can therefore affect the success of business representation.

1.3 The Role Of Employers, Associations In Policy Marking

Pluralist and corporatist approaches have both studied the role of employers’ associations in policy making. The basic difference lies in the fact that the former approach tends to consider organized business as one political actor among others (although often more influential than others) and consequently to confine its role to policy advocacy in pressure politics, whereas for the latter business organizations are active both in policy making and in policy implementation as a private interest lobby, and as effective intermediators between their members and the state.

In policy advocacy, employers’ associations compete with other actors—such as unions, consumer associations, environmental groups—in the attempt to influence the agenda of public policies, the formation of their content, and the way in which they are implemented once agreed in parliament and by government. Employers’ associations try to capture distributional benefits through exchanges with the state, providing information and pledges of political support. Basic requisites for successful advocacy are: the constant processing of specialized technical information about policy making, the skilful evaluation of the economic and structural effects of policy proposals on members; the ability to mobilize political support at crucial stages in the progress of a policy proposal (which in turn requires the maintainance of internal cohesion—not an easy task for employers’ associations given the great diversity of interests within them); the ability to cultivate public opinion, and to win public support, by presenting the specific purposes of organized business as compatible with broader national goals (such as economic growth, more effective competitiveness of the national economy in the global market, and employment opportunities); and the ability to establish relations with members of legislatures and top bureaucratic officials and to become parts of policy communities and ‘iron triangles.’

According to other scholars, employers’ associations can assume a second basic role in the political arena: the active involvement in formulating and/or implementing public policies. In order to play this more complex role, employers’ associations must be able to coordinate the complex range of information and activities that they are asked to assume by their members, by other organizations like trade unions, and by the state. They must be independent of both their members and the state, and in some cases they must assume responsibility for controlling their members’ compliance with agreed policy and for sanctioning their behavior.

Organizational development—which is an important variable in the analysis of the logic of membership—is also relevant in the analysis of the logic of influence. In fact, organizational development is also linked to policy achievement: associations that possess a developed organizational structure, sufficient autonomy from, and authority over, their members and the state, and are legitimated by the state, can play an effective role in the political arena. In turn, demonstrating effectiveness in securing the implementation of agreements leads to the delegation of greater authority to an association, thus increasing its importance with respect to both its members and the state.

In some countries, employers’ and business associations have actually acted as institutions of social regulation, alongside markets, public bureaucracies, and communities. Whilst the guiding principle of the market is dispersed competition, that of the community is spontaneous solidarity, and that of the public bureaucracy is hierarchical control, the guiding principle of employers’ and other organized interests is organizational concertation (Streeck and Schmitter 1985).

The case of the economies of continental Europe provides an interesting case. Here, the renewed focus on the central role of the market and of large multinational corporations in today’s global economy does not explain completely the complexity of institutional responses to the problems of economic governance and industrial adjustment. Business interest associations, together with large firms, international markets, and government agencies have been part of a balanced mix of coordinating institutions and regulatory mechamisms (Chiesi and Martinelli 1989). This regulation concerns both the external environment and relations with other collective actors, and the internal environment in which associations play a role of self-regulation and mediation among various business groups.

2. Conclusion

The logic of membership and the logic of influence remain the key issue in this study of employers associations. Emerging lines of research focus on the newly emerging supranational and transnational forms of interest intermediation, and the evolution of pressure politics in contemporary polyarchies. The weakenings of the nation state, and the increasing interdependence of productive and marketing processes, in fact induce employers’ associations to take action beyond the national boundaries. The focus is on the adaptability of national interest associations, on search processes, on structural and behavioral modifications, on organizational learning, design, and engineering, in the context of globalization and of the formation of supranational political entities like the European Union.

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