The Flattening Firm: Evidence from Panel Data on the Changing Nature of Corporate Hierarchies

Raghuram Rajan and Julie Wulf

No 9633, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using a detailed database of managerial job descriptions, reporting relationships, and compensation structures in over 300 large U.S. firms, we find that firm hierarchies are becoming flatter. The number of positions reporting directly to the CEO has gone up significantly over time while the number of levels between the lowest managers with profit center responsibility (division heads) and the CEO has decreased. More of these managers now report directly to the CEO and more are being appointed officers of the firm, reflecting a delegation of authority. Moreover, division managers who move closer to the CEO receive higher pay and greater long term incentives, suggesting that all this is not simply a change in organizational charts with no real consequences. We discuss several possible explanations that may account for some of these changes.

JEL-codes: D21 D23 (search for similar items in EconPapers)
Date: 2003-04
New Economics Papers: this item is included in nep-lab
Note: CF LS
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Citations: View citations in EconPapers (63)

Published as Rajan, Raghuram G. and Julie Wulf. "The Flattening Firm: From Panel Data On The Changing Nature Of Corporate Hierarchies," Review of Economics and Statistics, 2006, v88(4,Nov), 759-773.

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