A Work vs. Perk Model of Leadership and Organizational Culture

Benjamin Keefer
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Benjamin Keefer: Carleton College

No 2016-02, Working Papers from Carleton College, Department of Economics

Abstract: This paper considers the leader’s role in forming a culture by choosing the cultural focus and metric when agents have reference-dependent preferences. We find that combining a cultural work metric and external focus maximizes incentives. Principal-leaders favor this type of culture. Under agent-leadership, however, the favored culture critically depends on the relative magnitudes of the agent’s borrowing needs and pledgeable income. If agents’ borrowing needs slightly exceed the pledgeable income, agent-leaders prefer the incentive-maximizing culture. Yet, if agents’ pledgeable income exceeds the borrowing needs, agent-leaders prefer to minimize incentives by emphasizing an external cultural focus and a perk metric.

JEL-codes: D03 D23 M14 (search for similar items in EconPapers)
Date: 2016-07
Note: In Copyright
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