Arbeitspapier

Prosocial Managers, Employee Motivation, and the Creation of Shareholder Value

Milton Friedman has famously claimed that the responsibility of a manager who is not the owner of a firm is "to conduct the business in accordance with their [the shareholders'] desires, which generally will be to make as much money as possible." In this paper we argue that when contracts are incomplete it is not necessarily in the interest even of money maximizing shareholders to pick a manager who pursues this goal. We show in a formal model and in a series of lab experiments that choosing a manager who has a preference to spend resources for social causes can increase employee motivation. In turn, ex-post losses in shareholder value may be offset by ex-ante gains in performance through higher employee motivation.

Language
Englisch

Bibliographic citation
Series: IZA Discussion Papers ; No. 11789

Classification
Wirtschaft
Design of Experiments: Laboratory, Individual
Firm Behavior: Theory
Compensation Packages; Payment Methods
Personnel Economics: Compensation and Compensation Methods and Their Effects
Subject
shareholder value
corporate social responsibility
incentives
motivation
experiment

Event
Geistige Schöpfung
(who)
Kajackaite, Agne
Sliwka, Dirk
Event
Veröffentlichung
(who)
Institute of Labor Economics (IZA)
(where)
Bonn
(when)
2018

Handle
Last update
10.03.2025, 11:41 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Kajackaite, Agne
  • Sliwka, Dirk
  • Institute of Labor Economics (IZA)

Time of origin

  • 2018

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