Employee Ownership: Management Entrenchment vs. Reward Management

24 Pages Posted: 13 May 2011

See all articles by André Lapied

André Lapied

University of Angers - Research Group in Quantitative Saving (GREQAM)

Patrick Rousseau

Institut d'Administration des Entreprises d'Aix-en-Provence (IAE Aix)

Nicolas S. Aubert

Aix-Marseille Université; INSEEC Business School

Date Written: April 1, 2011

Abstract

Employee ownership is often used as a reward management tool but also as entrenchment mechanism. This paper develops a model suggesting that employee ownership policy reveals management quality. Good managers would use employee ownership as a reward management tool whereas bad managers would implement it for entrenchment motives. We bring about three main conclusions: (i) Bad managers use employee ownership as an entrenchment mechanism. (ii) This latter phenomenon increases the cost of employee ownership for good managers. (iii) Avoiding these problems necessitates that employee ownership policy should not be discretionary.

Keywords: Employee ownership, corporate governance, management entrenchent, reward management

JEL Classification: G11, G32, G34, J33

Suggested Citation

Lapied, André and Rousseau, Patrick and Aubert, Nicolas S., Employee Ownership: Management Entrenchment vs. Reward Management (April 1, 2011). International Conference of the French Finance Association (AFFI), May 2011. Available at SSRN: https://ssrn.com/abstract=1833405 or http://dx.doi.org/10.2139/ssrn.1833405

André Lapied (Contact Author)

University of Angers - Research Group in Quantitative Saving (GREQAM) ( email )

Centre de la Vieille Charité
2, rue de la Charité
Marseille, 13002
France

Patrick Rousseau

Institut d'Administration des Entreprises d'Aix-en-Provence (IAE Aix) ( email )

Clos Guiot Puyricard - CS 30063
Aix en Provence, Bouch du Rhone 13089
France
33-4-42-28-08-08 (Phone)

Nicolas S. Aubert

Aix-Marseille Université ( email )

France

INSEEC Business School ( email )

21, rue Alsace Lorraine
LYON, 69001
France

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