Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89772
Authors: 
Larmande, François
Ponssard, Jean-Pierre
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4569
Abstract: 
We study a principal-agent model in which the agent can provide ex post additional relevant information regarding his performance. In particular, he can provide a legitimate excuse, that is, evidence that a poor result is only due to factors outside his control. However, building a convincing case requires time, time that is not spent on exerting productive effort, and thus generating information represents an opportunity cost. We obtain necessary and sufficient conditions for the principal to prefer a policy of adjusting ex post the performance measure for the information provided by the agent to a policy of conforming to a result-based system with no adjustments. The risk aversion and a possible limited liability of the agent play an important role in the analysis. This paper clarifies the issues associated with the so-called “excuse culture” prevailing in some organizations.
Subjects: 
performance measurement
manipulation
controllability principle
excuse culture
influence activity
JEL: 
D82
M41
M52
Document Type: 
Working Paper

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