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

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  • Kajackaite, Agne

    (WZB - Social Science Research Center Berlin)

  • Sliwka, Dirk

    (University of Cologne)

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.

Suggested Citation

  • Kajackaite, Agne & Sliwka, Dirk, 2018. "Prosocial Managers, Employee Motivation, and the Creation of Shareholder Value," IZA Discussion Papers 11789, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp11789
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    Cited by:

    1. Sule Alan & Gozde Corekcioglu & Matthias Sutter, 2023. "Improving Workplace Climate in Large Corporations: A Clustered Randomized Intervention," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 138(1), pages 151-203.
    2. Hiller, Victor & Raffin, Natacha, 2020. "Firms’ social responsibility and workers’ motivation at the industry equilibrium," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 131-149.
    3. Kampkötter, Patrick & Petters, Lea M. & Sliwka, Dirk, 2021. "Employee identification and wages – on the economics of “Affective Commitment”," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 608-626.
    4. Nadia Burani, 2021. "No mission? No motivation. On hospitals' organizational form and charity care provision," Health Economics, John Wiley & Sons, Ltd., vol. 30(12), pages 3203-3219, December.
    5. Jiao, Anqi & Lu, Juntai & Wei, Jia & Zhang, Wenqiao, 2023. "Do prosocial CEOs promote innovation?," Finance Research Letters, Elsevier, vol. 55(PB).

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    More about this item

    Keywords

    incentives; corporate social responsibility; shareholder value; motivation; experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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