Employee Ownership: Management Entrenchment vs. Reward Management

24 Pages Posted: 13 Mar 2011 Last revised: 21 May 2011

See all articles by Nicolas S. Aubert

Nicolas S. Aubert

Aix-Marseille Université; INSEEC Business School

André Lapied

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

Patrick Rousseau

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

Date Written: April 1, 2011

Abstract

Previous literature shows that employee ownership can be used as a reward management tool or as entrenchment mechanism. This paper develop 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 entrenchment, reward

JEL Classification: G11, G32, G34, J33

Suggested Citation

Aubert, Nicolas S. and Lapied, André and Rousseau, Patrick, Employee Ownership: Management Entrenchment vs. Reward Management (April 1, 2011). Available at SSRN: https://ssrn.com/abstract=1783483 or http://dx.doi.org/10.2139/ssrn.1783483

Nicolas S. Aubert (Contact Author)

Aix-Marseille Université ( email )

France

INSEEC Business School ( email )

21, rue Alsace Lorraine
LYON, 69001
France

André Lapied

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)

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