Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185249
Authors: 
Kajackaite, Agne
Sliwka, Dirk
Year of Publication: 
2018
Series/Report no.: 
IZA Discussion Papers 11789
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.
Subjects: 
shareholder value
corporate social responsibility
incentives
motivation
experiment
JEL: 
C91
D03
D21
J33
M52
Document Type: 
Working Paper
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