IDEAS home Printed from https://ideas.repec.org/a/nms/mamere/1861-9908_mrev_2010_1_inauen.html
   My bibliography  Save this article

Back to the Future –A Monastic Perspective on Corporate Governance

Author

Listed:
  • Emil Inauen
  • Katja Rost
  • Margit Osterloh
  • Bruno S. Frey

Abstract

The financial crisis is a crisis of governance as well. In search of answers and solutions many scholars and practitioners recommend improved output control, i.e. better external incentives or even stricter regulations. Monasteries demonstrate that alternative models may be more suitable to enhance sustainable governance quality and to reduce agency problems. In the long history of monasteries, some abbots and monks were known to line their own pockets and some monasteries were undisciplined. Monasteries developed special systems to combat these excesses thus ensuring their survival over centuries. We study these features from an economic perspective. Derived from an analysis of the Benedictine monastery of Engelberg we offer three improvements of applied governance designed to reduce agency problems. First, monastic governance emphasizes clan control rather than output control. Monasteries demonstrate that organizations can prevent agency problems by complementing external discipline with internal behavioral incentives, such as value systems and voice. Second, organization members making firm-specific investments are motivated by broad participation rights and co-determination. Third, the Benedictines are able to apply supportive external control mechanisms, which are not perceived as controlling.

Suggested Citation

  • Emil Inauen & Katja Rost & Margit Osterloh & Bruno S. Frey, 2010. "Back to the Future –A Monastic Perspective on Corporate Governance," management revue - Socio-Economic Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 21(1), pages 38-59.
  • Handle: RePEc:nms:mamere:1861-9908_mrev_2010_1_inauen
    as

    Download full text from publisher

    File URL: https://www.nomos-elibrary.de/10.5771/0935-9915-2010-1-38
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fehr, Ernst & Falk, Armin, 2002. "Psychological foundations of incentives," European Economic Review, Elsevier, vol. 46(4-5), pages 687-724, May.
    2. Yermack, David, 1997. " Good Timing: CEO Stock Option Awards and Company News Announcements," Journal of Finance, American Finance Association, vol. 52(2), pages 449-476, June.
    3. Fama, Eugene F & Jensen, Michael C, 1983. "Agency Problems and Residual Claims," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 327-349, June.
    4. Kirsten Foss & Nicolai J. Foss & Xosé H. Vázquez, 2006. "'Tying the manager's hands': constraining opportunistic managerial intervention," Cambridge Journal of Economics, Oxford University Press, vol. 30(5), pages 797-818, September.
    5. Ferrero, Mario, 2008. "The triumph of Christianity in the Roman empire: An economic interpretation," European Journal of Political Economy, Elsevier, vol. 24(1), pages 73-87, March.
    6. Margit Osterloh & Bruno Frey, 2006. "Shareholders Should Welcome Knowledge Workers as Directors," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 10(3), pages 325-345, September.
    7. Cox, James C., 2004. "How to identify trust and reciprocity," Games and Economic Behavior, Elsevier, vol. 46(2), pages 260-281, February.
    8. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    9. George A. Akerlof, 1980. "A Theory of Social Custom, of which Unemployment may be One Consequence," The Quarterly Journal of Economics, Oxford University Press, vol. 94(4), pages 749-775.
    10. Margit Osterloh & Bruno S. Frey, 2000. "Motivation, Knowledge Transfer, and Organizational Forms," Organization Science, INFORMS, vol. 11(5), pages 538-550, October.
    11. Bruno S. Frey & Margit Osterloh, 2006. "Evaluations: Hidden Costs, Questionable Benefits, and Superior Alternatives," CREMA Working Paper Series 2006-23, Center for Research in Economics, Management and the Arts (CREMA), revised Oct 2006.
    12. Luigi Zingales, 2009. "The Future of Securities Regulation," Journal of Accounting Research, Wiley Blackwell, vol. 47(2), pages 391-425, May.
    13. Bruno S. Frey & Margit Osterloh, 2005. "Yes, Managers Should Be Paid Like Bureaucrats," CESifo Working Paper Series 1379, CESifo Group Munich.
    14. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
    15. Armin Falk & Ernst Fehr & Urs Fischbacher, 2003. "On the Nature of Fair Behavior," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 20-26, January.
    16. Katja Rost & Soren Salomo & Margit Osterloh, 2008. "CEO Appointments and the Loss of Firm-specific Knowledge - Putting Integrity Back into Hiring Decisions," CREMA Working Paper Series 2008-27, Center for Research in Economics, Management and the Arts (CREMA).
    17. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
    18. Lucian A. Bebchuk & Jesse M. Fried, 2005. "Pay Without Performance: Overview of the Issues," Journal of Applied Corporate Finance, Morgan Stanley, vol. 17(4), pages 8-23, September.
    19. William G. Ouchi, 1979. "A Conceptual Framework for the Design of Organizational Control Mechanisms," Management Science, INFORMS, vol. 25(9), pages 833-848, September.
    20. Rachel M. McCleary & Robert J. Barro, 2006. "Religion and Economy," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 49-72, Spring.
    21. Michael C. Jensen, 2003. "Paying People to Lie: the Truth about the Budgeting Process," European Financial Management, European Financial Management Association, vol. 9(3), pages 379-406, September.
    22. Aboody, David & Kasznik, Ron, 2000. "CEO stock option awards and the timing of corporate voluntary disclosures," Journal of Accounting and Economics, Elsevier, vol. 29(1), pages 73-100, February.
    23. Kathleen M. Eisenhardt, 1985. "Control: Organizational and Economic Approaches," Management Science, INFORMS, vol. 31(2), pages 134-149, February.
    24. Anna Grandori & Bruce Kogut, 2002. "Dialogue on Organization and Knowledge," Organization Science, INFORMS, vol. 13(3), pages 224-231, June.
    25. Roberta Romano, 2004. "The Sarbanes-Oxley Act and the Making of Quack Corporate Governance," Yale School of Management Working Papers amz2653, Yale School of Management, revised 01 Jul 2005.
    26. Azzi, Corry & Ehrenberg, Ronald G, 1975. "Household Allocation of Time and Church Attendance," Journal of Political Economy, University of Chicago Press, vol. 83(1), pages 27-56, February.
    27. Ernst Fehr & Armin Falk, 2002. "Psychological Foundations of Incentives," CESifo Working Paper Series 714, CESifo Group Munich.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. André Habisch, 2013. "Spiritual capital," Chapters, in: Luigino Bruni & Stefano Zamagni (ed.), Handbook on the Economics of Reciprocity and Social Enterprise, chapter 34, pages 336-343, Edward Elgar Publishing.
    2. Peter Wirtz & Odile Paulus & Patrice Charlier, 2011. "Gouvernance et création de valeur cognitive : L'exemple de l'ordre des prêcheurs," Post-Print halshs-00642977, HAL.
    3. Peter Wirtz, 2013. "Gouvernance et efficacité missionnaire de la Compagnie de Jésus : les enseignements d'une théorie élargie de la gouvernance," Working Papers halshs-00862068, HAL.
    4. Peter Wirtz, 2019. "Are Corporate Governance Theories Relevant to the History and Long-Term Survival of Catholic Orders?," Post-Print hal-02277837, HAL.
    5. Peter Wirtz, 2019. "Are Corporate Governance Theories Relevant to Account for the History and Long- Term Survival of Old Catholic Orders?," Working Papers hal-02083983, HAL.
    6. Peter Wirtz & Odile Paulus & Patrice Charlier, 2012. "La gouvernance des Dominicains au-delà des théories établies," Working Papers halshs-00691233, HAL.
    7. Emil Inauen & Margit Osterloh & Bruno Frey & Fabian Homberg, 2015. "How a multiple orientation of control reduces governance failures: a focus on monastic auditing," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(4), pages 763-796, November.

    More about this item

    Keywords

    corporate governance; financial crisis; psychological economics; monasteries; principal agency theory; Benedictine Order;

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nms:mamere:1861-9908_mrev_2010_1_inauen. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nomos Verlagsgesellschaft mbH & Co. KG). General contact details of provider: http://www.nomos.de/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.