Managerial Objectives, Capital Structure, and the Provision of Worker Incentives
Abstract
Worker incentive schemes are invariably assumed to be administered by an owner-entrepreneur who has an incentive to understate worker performance after the event. While tournaments can overcome this problem, they discourage cooperation between workers. The authors show that a professional manager concerned with equality between workers and with avoiding bankruptcy rather than maximizing shareholder wealth will conduct a tournament that preserves individual effort incentives while promoting cooperation between workers. The theory predicts lower debt levels and more compressed pay scales as cooperation becomes more important. In the limit, this becomes a group bonus scheme supported by "blue-chip" debt. Copyright 1992 by University of Chicago Press.Download Info
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Bibliographic Info
Article provided by University of Chicago Press in its journal Journal of Labor Economics.
Volume (Year): 10 (1992)
Issue (Month): 4 (October)
Pages: 357-79
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Handle: RePEc:ucp:jlabec:v:10:y:1992:i:4:p:357-79
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Linus Wilson, 2003. "Hard Debt, Soft CEO`s and Union Rents," Economics Series Working Papers 170, University of Oxford, Department of Economics.
- DeVaro, Jed, 2011. "Using "opposing responses" and relative performance to distinguish empirically among alternative models of promotions," MPRA Paper 35175, University Library of Munich, Germany.
- Robert Drago & Gerald T. Garvey, 1994. "Incentives for Helping on the Job: Theory and Evidence," Labor and Demography 9402002, EconWPA, revised 29 Mar 1994.
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