We analyze the optimal ownership, delegation and compensation structures when a manager is hired to run a firm and to gather information on investment projects. The initial owner has two tasks: monitoring the manager and supervising project choice. Optimality would require a large ownership stake for monitoring but a small stake for not interfering with managerial incentives. Delegating project choice to the manager can alleviate this conflict if managerial private benefits are not too small. The large shareholder retains full ownership of the firm but monitoring, and the resulting firing policy, are distorted. Severance pay plays a key role in the optimal compensation scheme. Delegation is interpreted as a dual-board structure.

Optimal delegation when the large shareholder has multiple tasks, CESifo Working Paper n. 3028, ISSN 2364-1428 / Luporini Florence, A.. - STAMPA. - (2010), pp. 1-32.

Optimal delegation when the large shareholder has multiple tasks, CESifo Working Paper n. 3028, ISSN 2364-1428

LUPORINI FLORENCE, ANNALISA
2010

Abstract

We analyze the optimal ownership, delegation and compensation structures when a manager is hired to run a firm and to gather information on investment projects. The initial owner has two tasks: monitoring the manager and supervising project choice. Optimality would require a large ownership stake for monitoring but a small stake for not interfering with managerial incentives. Delegating project choice to the manager can alleviate this conflict if managerial private benefits are not too small. The large shareholder retains full ownership of the firm but monitoring, and the resulting firing policy, are distorted. Severance pay plays a key role in the optimal compensation scheme. Delegation is interpreted as a dual-board structure.
2010
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in FLORE sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificatore per citare o creare un link a questa risorsa: https://hdl.handle.net/2158/386873
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact