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Can Private Learn from Public Governance?

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  • Bruno S. Frey
  • Matthias Benz

Abstract

Corporate governance is importantly based on agency theory and relies on extrinsic incentives to align the interests of managers, employees and shareholders. This article argues that in view of recent corporate scandals, private governance can learn from public governance: (1) Goal-oriented intrinsic motivation of agents should be supported by fixed incomes and an extensive selection process of employees; (2) Extrinsic, but non-monetary incentives (e.g. conferring orders and titles) can be used; (3) The power of actors should be restricted by a clear division of power, appropriate rules of succession and institutionalised competition for positions in firms. Copyright 2005 Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 115 (2005)
Issue (Month): 507 (November)
Pages: F377-F396

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Handle: RePEc:ecj:econjl:v:115:y:2005:i:507:p:f377-f396

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Cited by:
  1. Matthias Benz, 2006. "Was kann die Corporate Governance in der Schweiz von der Public Governance lernen?," IEW - Working Papers 305, Institute for Empirical Research in Economics - University of Zurich.
  2. Carolyn J. Heinrich & Gerald Marschke, 2010. "Incentives and their dynamics in public sector performance management systems," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(1), pages 183-208.
  3. Belloc, Filippo, 2013. "Innovation in State-owned Enterprises: Reconsidering the Conventional Wisdom," MPRA Paper 54748, University Library of Munich, Germany, revised 01 Mar 2014.

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