How managerial wage transparency may reduce shareholder returns Evidence from an experiment

Peter Werner, Gary Bolton () and Axel Ockenfels

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: We study the role of transparency in a novel three-person profit sharing game in which managers and board directors decide on how to distribute the revenues of a company among themselves and shareholders, who are the residual claimants of the companies revenues. We examine two hypotheses. One is that the distribution of revenues is largely determined by an informal quid pro quo among the two decision makers at the expense of shareholders. The second hypothesis is that public transparency attenuates exaggerated manager pay because of increased social pressure. We find strong support for our first hypothesis, but reject the second one: Public transparency actually increases managerial wages as well as board director compensation, further reducing the revenue share that goes to shareholders. Competition to keep managers further magnifies these patterns.

JEL-codes: C92 D63 G34 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-exp and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/79766/1/VfS_2013_pid_33.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79766

Access Statistics for this paper

More papers in VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().