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Like principal, like agent? Managerial preferences in employee-owned firms

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  • Alves, Guillermo
  • Blanchard, Pablo
  • Burdin, Gabriel
  • Chávez, Mariana
  • Dean, Andrés
Abstract
The relationship between firms’ owners and managers is a quintessential example of costly principal–agent interaction. Optimal design of monetary incentives and supervision mechanisms are the two traditional ways of reducing agency costs in this relationship. In this paper, we show evidence which is consistent with a third mechanism: firms have managers whose economic preferences are aligned with owners' interests. We uncover differences in economic preferences between managers employed in firms controlled by two distinct classes of ‘patrons’: employee-owned firms (worker cooperatives) and conventional investor-owned firms. In a high-stakes lab-in-the-field experiment, we find that co-op managers are less risk-loving and more altruistic than their conventional counterparts. We do not observe differences between the two groups in terms of time preferences, reciprocity, and trust. Our findings are consistent with existing evidence on worker cooperatives, such as their tendency to self-select into less risky industries and their compressed compensation structures.

Suggested Citation

  • Alves, Guillermo & Blanchard, Pablo & Burdin, Gabriel & Chávez, Mariana & Dean, Andrés, 2022. "Like principal, like agent? Managerial preferences in employee-owned firms," Journal of Institutional Economics, Cambridge University Press, vol. 18(6), pages 877-899, December.
    • Handle: RePEc:cup:jinsec:v:18:y:2022:i:6:p:877-899_1
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    More about this item

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms

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