Optimal delegation when the large shareholder has multiple tasks

Arbeitspapier

We analyze the optimal ownership, delegation and compensation structures when a manager is hired to run a firm and to gather information on investment projects. The initial owner has two tasks: monitoring the manager and supervising project choice. Optimality would require a large ownership stake for monitoring but a small stake for not interfering with managerial incentives. Delegating project choice to the manager can alleviate this conflict if managerial private benefits are not too small. The large shareholder retains full ownership of the firm but monitoring, and the resulting firing policy, are distorted. Severance pay plays a key role in the optimal compensation scheme. Delegation is interpreted as a dual-board structure.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3028

Classification and Topics

• Classification: Wirtschaft ; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance ; Firm Organization and Market Structure
• Subject: large shareholder ; delegation ; monitoring ; board of directors ; corporate governance ; Corporate Governance ; Kooperative Führung ; Leistungskontrolle ; Vergütungssystem ; Eigentümerstruktur ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Graziano, Clara ; Luporini, Annalisa
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/38883
• Last update: 10.03.2025, 11:44 AM CET