Optimal Dissent in Organizations

34 Pages Posted: 18 Nov 2005

See all articles by Augustin Landier

Augustin Landier

Toulouse School of Economics

David Alexandre Sraer

University of California, Berkeley; Princeton University

David Thesmar

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA)

Date Written: November 2, 2005

Abstract

This paper is a theoretical exploration on the costs and benefits of passive resistance in the chain of command. In our model, the organization consists of two employees: an informed decision maker (she) in charge of selecting a project, and an uninformed implementer (he) in charge of its execution. Both employees have intrinsic and possibly differing preferences over projects. Overall success depends on both project selection and its implementation.

We find that a certain level of disagreement in the chain of command may be useful to (1) prevent bad decisions from being taken and (2) give credibility to the accuracy of the decision maker's orders. Hence, there is an optimal level of dissent in organizations, which is larger when the extent of the decision maker's private information is higher.

We apply our analysis to two questions: (1) the political independence of government agencies and (2) the current debate on corporate governance.

Keywords: Organization Design, Corporate Governance, Authority

JEL Classification: M13, G30, D20

Suggested Citation

Landier, Augustin and Sraer, David Alexandre and Thesmar, David, Optimal Dissent in Organizations (November 2, 2005). Available at SSRN: https://ssrn.com/abstract=849257 or http://dx.doi.org/10.2139/ssrn.849257

Augustin Landier

Toulouse School of Economics ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

David Alexandre Sraer (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

David Thesmar

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States
16172259767 (Phone)

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