Organizational Governance: Managerial Discretion, Automatic Rules or Ethics?
AbstractEconomic literature on organizations (Milgrom, 1998; Milgrom and Roberts 1992, 2009) points out that when distributive policies are discretionary realized within firms by managers, the agents working in the organization will undertake "influence activities" with possible negative effects on firm's productivity. Following the Milgrom's model (1988), we define a principal-agent framework analyzing alternative organizational governance methods. The paper shows that managerial discretion can always result in improved firm's performance with a principal complying with the organizational goals. Nevertheless, some reforms, especially in the public organizations, have been addressed to limit managerial discretion introducing more rules to template the mangers' behavior. Disappointing results suggest to invest for a greater development of ethical culture within organizations.
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Bibliographic InfoPaper provided by Istituto di Economia e Finanza, DIGEF, Sapienza University of Rome in its series Public Finance Research Papers with number 5.
Length: 18 pages
Date of creation: May 2014
Date of revision:
organizations; influence activities; managerial discretion; principal-agent;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-06-14 (All new papers)
- NEP-BEC-2014-06-14 (Business Economics)
- NEP-HRM-2014-06-14 (Human Capital & Human Resource Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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