What Makes Autonomous Management Do Well? Corporate Governance Without External Controls

24 Pages Posted: 16 Feb 2003

See all articles by Shinichi Hirota

Shinichi Hirota

Waseda University - Graduate School of Commerce

Kohei Kawamura

University of Oxford - Nuffield College

Multiple version iconThere are 2 versions of this paper

Date Written: February 2003

Abstract

We propose a model of the widely held firm where management may behave on behalf of shareholders even without external controls. The model shows that there exists a corporate governance mechanism inside the firm where workers are employed on a long-term basis. When effort of young workers depends on managerial decision-making, they give implicit pressure on the managers, which may substitute control by shareholders. If this mechanism works fairly well, it is optimal for shareholders to leave the firm autonomous. We also discuss how the firm's internal factors (such as retention rate and business information sharing) and external environments (such as product market competition and labor market rigidity) affect the efficacy of this internal governance mechanism.

Keywords: corporate governance, management autonomy, shareholder intervention, long-term employment

JEL Classification: G34, J41

Suggested Citation

Hirota, Shinichi and Kawamura, Kohei, What Makes Autonomous Management Do Well? Corporate Governance Without External Controls (February 2003). Available at SSRN: https://ssrn.com/abstract=379100 or http://dx.doi.org/10.2139/ssrn.379100

Shinichi Hirota

Waseda University - Graduate School of Commerce ( email )

1-6-1, Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050
Japan
+81-3-5286-2088 (Phone)
+81-3203-7067 (Fax)

Kohei Kawamura (Contact Author)

University of Oxford - Nuffield College ( email )

New Road
Oxford, OX11 1NF
United Kingdom
+44-(0)1865-278600 (Phone)
+44-(0)1865-278621 (Fax)

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