Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18743
Authors: 
Frey, Bruno S.
Osterloh, Margit
Year of Publication: 
2005
Series/Report no.: 
CESifo Working Paper 1379
Abstract: 
Corporate scandals, reflected in excessive management compensation and fraudulent accounts, cause considerable damage. Agency theory's insistence on linking the compensation of managers and directors as closely as possible to firm performance is a major reason for these scandals. They cannot be overcome by improving variable pay for performance, as selfish extrinsic motivation is reinforced. Based on the common pool approach to the firm, institutions are proposed which serve to raise intrinsically motivated corporate virtue. More importance is to be attributed to fixed pay and strengthening the legitimacy of authorities by procedural fairness, relational contracts and organizational citizenship behavior.
Subjects: 
agency theory
intrinsic motivation
crowding theory
management compensation
pay for performance
organizational citizenship
JEL: 
D23
D21
L20
J33
Document Type: 
Working Paper

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