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

Agne Kajackaite () and Dirk Sliwka
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Agne Kajackaite: WZB - Social Science Research Center Berlin

No 11789, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: 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.

Keywords: shareholder value; corporate social responsibility; incentives; motivation; experiment (search for similar items in EconPapers)
JEL-codes: C91 D03 D21 J33 M52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hpe and nep-hrm
Date: 2018-08
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