Back to the Future - A Monastic Perspective on Corporate Governance

26 Pages Posted: 16 Jul 2009

See all articles by Emil Inauen

Emil Inauen

University of Zurich - Institute for Organization and Administrative Science

Katja Rost

University of Zurich - Institute for Organization and Administrative Science

Margit Osterloh

University of Basel; Professor (em.) University of Zurich

Bruno S. Frey

CREMA; University of Basel

Date Written: July 16, 2009

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. Second, monasteries demonstrate that organizations can prevent agency problems by complementing external discipline with internal behavioral incentives, such as value systems and voice. Third, organization members who make firm-specific investments are motivated by broad participation rights and co-determination.

Keywords: Corporate Governance, Financial Crisis, Psychological Economics, Monasteries, Principal Agency Theory, Benedictine Order

JEL Classification: D73, G3, N3, Z12

Suggested Citation

Inauen, Emil and Rost, Katja and Osterloh, Margit and Frey, Bruno S., Back to the Future - A Monastic Perspective on Corporate Governance (July 16, 2009). Available at SSRN: https://ssrn.com/abstract=1434814 or http://dx.doi.org/10.2139/ssrn.1434814

Emil Inauen (Contact Author)

University of Zurich - Institute for Organization and Administrative Science ( email )

Switzerland

Katja Rost

University of Zurich - Institute for Organization and Administrative Science ( email )

Plattenstrasse 14
CH-8032 Zurich
Switzerland

Margit Osterloh

University of Basel ( email )

Petersplatz 1
Basel, CH-4003
Switzerland

Professor (em.) University of Zurich ( email )

Südstrasse 11
Zürich, CH-8008
Switzerland

Bruno S. Frey

CREMA ( email )

Südstrasse 11
Zurich, CH 8008
Switzerland
+41 44 380 00 78 (Phone)

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

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