Individual and Group Power

Week 10, Monday

Psychology 360
Outline
I. Power and politics
II. Individual bases of power
III. Group bases of power
IV. Power in action

Power tends to corrupt, and absolute power corrupts absolutely -- Lord Acton
Power, like a desolating pestilence
Polutes whate’er it touches -- P.B. Shelley
Those who have been once intoxicated with power can never willingly abandon it -- Edmund Burke
Power and politics
power is the strength of a person’s or a group’s capacity to influence others
politics is the self-interested use of power
Reward and coercive power

Find the source of power
why do soldiers follow officers’ orders?
reward, coercive, legitimate
why do students emulate faculty?
referent
why do CEOs listen to R & D directors?
expert
Group bases of Power
resource dependency -- power derived from control over critical resources (Pfeffer)
strategic contingencies -- power derived from contingency of other units’ actions on your actions (Lawrence & Lorsch)
The LS&A Budget Office
what critical resource do they control?
money!
what critical contingencies do they control?
financial planning
Power in Action
Mergers and acquisitions: struggle for control over corporate assets
How the game is played: look for target companies that are worth more broken up than together
The players: financiers capable of raising enormous capital in a short amount of time
Some important terms
LBO = Leveraged BuyOut (i.e., hostile takeover)
greenmail = bids designed to inflate the value of stock held in a takeover target
junk bonds = high risk securities used to rapidly mobilize capital
white knights = “friendly” firms who pre-empt bids by hostile firms
insider trading = illegal use of securities information for personal gain
Copyright © 1996, The Regents of the University of Michigan, All rights reserved.
Revised - November 4, 1996