Politics in the Boardroom: Corporate Pay, Networks and Recruitment of Former Parliamentarians, Ministers and Civil Servants in Britain
| Published date | 01 December 2013 |
| DOI | 10.1111/j.1467-9248.2012.00994.x |
| Date | 01 December 2013 |
| Subject Matter | Article |
bs_bs_banner
P O L I T I C A L S T U D I E S : 2 0 1 3 VO L 6 1 , 8 5 0 – 8 7 3
doi: 10.1111/j.1467-9248.2012.00994.x
Politics in the Boardroom: Corporate Pay,
Networks and Recruitment of Former
Parliamentarians, Ministers and Civil Servants
in Britain
Sandra González-Bailon
Will Jennings
Martin Lodge
University of Oxford
University of Southampton
London School of Economics and
Political Science
This article explores an important aspect of post-career earnings in public life in Britain: membership of corporate
boards by former parliamentarians, ministers and civil servants. It attempts to determine whether this group represents
a distinct group within the wider network of interlocking corporate directorships in the UK. Further, it investigates
the characteristics of those individuals who obtain appointments as non-executive directors to the boards of
FTSE-listed companies after service in parliament and/or government. The analysis uses data on board membership
and pay in Britain for more than 700 companies listed on the London Stock Exchange and over 7,500 directors and
1,000 former parliamentarians, government ministers and civil servants.The findings suggest that although this group
is represented in the wider corporate network, these individuals are not more central than other directors and do not
receive significantly different compensations once industry sector, experience and board role are controlled for. This
article offers a novel insight into the interconnectedness of the public sphere and the corporate world.
Keywords: post-career rewards; high public officials; interlocking directorships; network
analysis
Private wealth extracted by individuals after service in politics or government raises
important questions close to the heart of democratic politics and public life. Salary levels,
allowances and other perks of elected or unelected office are a recurring topic of interest in
a wide range of social and political settings (e.g. Brans and Peters, 2012; Eggers and
Hainmueller, 2009; Hood and Peters, 1994; 2003; Hood et al. 2001). One of the central
concerns of such studies is the nature of the post-career earnings of individuals after leaving
public life – whether as elected officials or as unelected civil servants.This article considers
such post-career earnings in Britain through the appointment of former parliamentarians,
government ministers and senior civil servants to corporate directorships in the City of
London. Specifically, it seeks to shed light on the recruitment of former politicians and
bureaucrats to corporate boards and the nature of financial returns to office. Whereas it is
possible to measure the effect of political office on individual wealth (Eggers and Hainmuel-
ler, 2009), this article analyses the role performed by individuals who migrate from public life
to serve as directors on the boards of top British companies and the nature of financial
remuneration received for this work. In this, financial returns to office are secured in the
form of salaries and share options awarded as a consequence of corporate directorships.
This question of financial returns to office is not just a British phenomenon. Similar
concerns arise in comparative context (see Winters and Page, 2009).There are conventions,
for example, of post-retirement financial returns through the recruitment of former civil
© 2012 The Authors. Political Studies © 2012 Political Studies Association
P O L I T I C S I N T H E B O A R D R O O M
851
servants to private firms or public corporations in Japan (see Blumenthal, 1985; Colignon
and Usui, 2003; Johnson, 1974; Nakamura and Dairokuno, 2003) and South Korea (Kim,
2003), while the ‘revolving door’ between government and industry has been a long-
standing focus of research in the US, in particular with regard to regulation (e.g. Cohen,
1986; Freitag, 1975; Gormley, 1979). In a wider sense, too, the recruitment of former
politicians and civil servants to the boards of leading firms has the potential to provide
insight into the relationship between politics, government and business.
The theoretical approach behind our interest in the patterns of recruitment of former
parliamentarians, government ministers and civil servants to the boardrooms of British
companies, and the nature of post-career financial returns to office, rests upon specific
expectations about the behaviour of individuals (including both elected and unelected
officials) and firms. For individuals, appointments to corporate boards provide a means for
securing financial remuneration through directors’ salaries and also for obtaining non-
financial benefits such as prestige or networking opportunities (for example maintaining
professional status or regular involvement in public life). It is important to emphasise that
not all individuals who serve in parliament or British government wish, or possess the
requisite skills, to serve on the boards of companies. The personal wealth of individuals is
also subject to variation, leading to different motivations for post-career earnings. However,
corporate directorships are one of a number of the potential sources of income for
individuals after leaving parliament and/or British government (as elected or unelected
officials). For firms, the recruitment of former parliamentarians, government ministers or
civil servants offers a number of sources of economic value, such as knowledge of the policy
process and procurement (e.g. Faccio, 2006; Goldman et al., 2009; Jayachandran, 2006;
Roberts, 1990), political connections and prestige accrued during time in public office.
These differ from the expertise available from other corporate directors with technical
expertise in industry or financial accounting.
To come to a better understanding both of the extent to which British companies
appoint former politicians and civil servants to their boards and the nature of financial
returns to office, this article seeks to determine whether certain career attributes – such as
departmental background, seniority and political affiliation – are associated with greater
connectedness and higher levels of financial remuneration for former ministers, parliamen-
tarians and civil servants who later enter the corporate world. In so doing, it generates
insights into the connection between politics, government and business. To achieve this,
network analysis methods are applied to a data set of corporate directors that covers up to
98 per cent of the capital value of companies traded on the London Stock Exchange.
The article proceeds in three steps. First, it outlines a theoretical approach to account for
the recruitment of former parliamentarians, ministers and civil servants to corporate boards
and expectations concerning the nature of financial returns to office. Specifically, it
introduces the concept of interlocking directorates for measuring the migration of former
politicians and bureaucrats to the corporate world. Second, it describes the data set on
which the analysis is based; the database contains information on more than 1,000 indi-
viduals who served in the British government or parliament at some time between 1970
and 2008 and more than 7,500 directors and 700 companies. Third, it presents results on
post-career earnings through membership of corporate boards which reveal: (1) differences
© 2012 The Authors. Political Studies © 2012 Political Studies Association
POLITICAL STUDIES: 2013, 61(4)
852
S A N D R A G O N Z Á L E Z - B A I L O N , W I L L J E N N I N G S A N D M A R T I N L O D G E
in the positions and rewards of former politicians and civil servants compared with other
directors; (2) the degree to which individuals who once inhabited British politics or
government are represented within the network of corporate directors; and (3) the con-
nectedness and compensation of the former parliamentarians, ministers and civil servants
who sit on corporate boards.1 It also considers the association of specific individual
attributes – for example departmental background, political affiliation and rank/seniority –
with network connectedness and the level of financial remuneration. The implications of
the findings are then reflected upon in conclusion.
Corporate Networks and Post-career Earnings in Public Life
In Britain, an important feature of the traditional ‘public service bargain’ that applied both
to politicians in Westminster and to senior bureaucrats in Whitehall in the era of club
government was the possibility for earnings outside public life (Hood and Lodge, 2006, ch.
4; Lodge, 2012). For senior civil servants, such opportunities arose after their retirement
from public service, while for politicians these were sometimes possible in combination
with opposition or back-bench activities as well as after their retirement from elected office.
This arrangement reflected the close ties that existed between the worlds of high finance
and politics (e.g. Heclo and Wildavsky, 1974; Marquand, 1981; Moran, 2003), and in
particular involved the translation of political capital to the corporate boardroom.
The close interrelationship between politics, government and business comes into
particular focus when considered as part of a wider inquiry into the influence of social class
and educational backgrounds in corporate networks (e.g. Burris, 2005; Davis and Greve,
1997; Mizruchi, 1996; Scott, 1991; Scott and Griff, 1984). Connections across and within
these...
To continue reading
Request your trial