Delegated social responsibility: Is managerial prosociality a source of agency cost?

Wiebke Szymczak

No 2/2026, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: Agency theory holds that managerial discretion over stakeholder decisions creates agency costs through altruistic redistribution. We test this claim in a principal-agent experiment where agents choose effort and transfers affecting a third party under unenforceable flat-wage contracts. We find that principals set ethically constrained targets and wages that track fairness benchmarks. Agents, however, do not divert resources to stakeholders: transfers are negative on average, and prosocial traits do not increase giving. Instead, contract terms, though unenforceable, systematically shape effort, transfers, and returns. Notably, prosocial agents generate higher total returns. Prosociality appears to mitigate rather than create efficiency losses, suggesting that discretion channels norm-sensitive loyalty rather than stake-holder redistribution.

Keywords: agency theory; behavioral contracts; corporate social responsibility; experimental economics; managerial discretion; prosocial motivation (search for similar items in EconPapers)
JEL-codes: C91 D23 D64 G30 M52 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:336907

DOI: 10.18717/dp9k5a-gs50

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