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Managerial ownership with rent-seeking employees

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  • Linus Wilson

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

Suggested Citation

  • Linus Wilson, 2014. "Managerial ownership with rent-seeking employees," Annals of Finance, Springer, vol. 10(3), pages 375-394, August.
    • Handle: RePEc:kap:annfin:v:10:y:2014:i:3:p:375-394
    DOI: 10.1007/s10436-013-0225-6
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    References listed on IDEAS

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    More about this item

    Keywords

    CEO compensation; Contracts; Corporate control; Shareholders; Rent-seeking; Unions; D23; G34;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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