Managerial ownership with rent-seeking employees

Linus Wilson ()

Annals of Finance, 2014, vol. 10, issue 3, 375-394

Abstract: In some cases, the incentives of the manager will affect the behavior of the firm’s employees. A manager with low-powered incentives will discourage employees from engaging in destructive rent-seeking activities. Union members will need to cooperate with this poorly compensated manager if the firm will have any chance to succeed. The elimination of rent-seeking costs can increase the value of owners’ stakes in the firm. Thus, value can be maximized by giving control to a CEO with an ownership stake strictly less than 100 percent. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: CEO compensation; Contracts; Corporate control; Shareholders; Rent-seeking; Unions; D23; G34 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s10436-013-0225-6

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