Margit Osterloh

Yes, Managers Should Be Paid Like Bureaucrats

Corporate scandals, reflected in excessive management compensation and fraudulent accounts, cause great damage. Agency theory’s insistence to link the compensation of managers and directors as closely as possible to firm performance is a major reason for these scandals. They cannot be overcome by improving variable pay for performance as selfish extrinsic motivation is reinforced. Based on the common pool approach to the firm, institutions are proposed, serving to raise intrinsically motivated corporate virtue. More importance is to be attributed to fixed pay and strengthening the legitimacy of authorities by procedural fairness, relational contracts, and organizational citizenship behavior.

The Dynamics of Motivation in New Organizational Forms

This paper discusses the impact of the dynamics of motivation on new organizational forms that are suited to forge value-creating knowledge transfers in teams and between organizational units and functions. Our aim is to develop the management of motivation as a source of distinctive firm competences. We argue that motivation is an endogenous variable and introduce it as a crucial link into the theory of the firm. Balancing intrinsic and extrinsic motivation helps to overcome social dilemmas in firms that are not solvable by hierarchical authority. Integrating the dynamics of motivation is a step to a more comprehensive theory of organization. It links organizational economics to the knowledge-based perspective.

Corporate Governance for Crooks? The Case for Corporate Virtue

Corporate scandals are reflected in excessive top management compensation and fraudulent accounts. These scandals cause an enormous amount of damage, not only to the companies affected, but also to the market economy as a whole. As a solution, conventional wisdom suggests more monitoring and sanctioning of management. We argue that these efforts will create a governance structure for crooks. Instead of solving the problem, they make it worse. Selfish extrinsic motivation is reinforced. We suggest measures which clash with conventional wisdom: selecting employees with pro-social intrinsic preferences, de-emphasizing variable pay for performance and strengthening the participation and self-governance of employees. These measures help to increase intrinsically motivated corporate virtue and honesty.

Organizational Control Systems and Pay-for-Performance in the Public Service

Under certain conditions, output related performance measurement and pay-for-performance produce negative outcomes. We argue that in public service, these negative effects are stronger than in the private sector. We combine Behavioural Economics and Management Control Theory to determine under which conditions this is the case. We suggest as alternatives to the dominant output related pay-for-performance systems selection and socialization, exploratory use of output performance measures, and awards.

Managing Motivation, Organization and Governance

To a high degree Simon’s work is identified with the introduction of “Bounded rationality” into economics and with the behavioral theory of the firm. Today, bounded rationality has become a conventional footnote in almost every economic treatment. However, it often does not do justice to Simon’s far-reaching ideas. Much has been neglected, in particular Simon’s emphasis on motivation, including workers’ identification with their firm. In our paper, we focus on these aspects neglected in organizational economics. We seek to complement them with an approach, which makes motivation an endogenous variable to management. At the same time, we introduce a dynamic relationship between extrinsic and intrinsic motivation into the theory of the firm. The management of these two kinds of motivation becomes a crucial task, particularly when production is knowledge intensive.

Management Fashion Pay-for-Performance for CEOs

We show theoretically and empirically that Pay-for-Performance, like many management fashions, has not achieved its intended aim. Our research focuses on previous empirical studies that examine the relation between variable executive pay and firm performance on various different dates. Our results indicate that a variable CEO income contributes very little to the increase of the firm’s performance, and that CEO salary and firm performance are not linked. The example of Pay-for-Performance shows that in the long run, many management fashions do not solve the problems that they promise to solve.

Evaluations: hidden costs, questionable benefits and superior alternatives

Research evaluation is praised as the symbol of modern quality management. We claim firstly, performance evaluations in research have higher costs than normally assumed, because the evaluated persons and institutions systematically change their behavior and develop counter strategies. Moreover, intrinsic work motivation is crowded out and undesired lock-in effects take place. Secondly, the benefits of performance evaluations are questionable. Evaluations provide too little information relevant for decision-making. In addition, they lose importance due to new forms of scientific cooperation on the internet. Thirdly, there exist superior alternatives. They consist in careful selection and supportive process coaching i?½ and then leave individuals and research institutions to direct themselves.

The Corporate Governance of Benedictine Abbeys: What can Stock Corporations Learn from Monasteries?

The corporate governance structure of monasteries is analyzed to derive new insights into solving agency problems of modern corporations. In the long history of monasteries, some abbots and monks lined their own pockets and monasteries were undisciplined. Monasteries developed special systems to check these excesses and therefore were able to survive for centuries. These features are studied from an economic perspective. Benedictine monasteries in Baden-Württemberg, Bavaria and German speaking Switzerland have an average lifetime of almost 500 years and only a quarter of them broke up as a result of agency problems. We argue that this is due to an appropriate governance structure, relying strongly on the intrinsic motivation of the members and on internal control mechanisms.

Governance by Numbers. Does It Really Work in Research

Abstract Performance evaluation in research is more and more based on numbers of publications, citations, and impact factors. In the wake of New Public Management output control has been introduced into research governance without taking into account the conditions necessary for this kind of control to work efficiently. It is argued that to evaluate research by output control is counterproductive. It induces to substitute the ‘taste for science’ by a ‘taste for publication’. Instead, input control by careful selection and socialization serves as an alternative.

The corporate governance of Benedictine abbeys

Purpose – This paper aims to analyse the governance structure of monasteries to gain new insights and apply them to solve agency problems of modern corporations. In an historic analysis of crises and closures it asks, if Benedictine monasteries were and are capable of solving agency problems. The analysis shows that monasteries established basic governance instruments very early and therefore were able to survive for centuries.Design/methodology/approach – The paper uses a dataset of all Benedictine abbeys that ever existed in Bavaria, Baden‐Wurttemberg, and German‐speaking Switzerland to determine their lifespan and the reasons for closures. The governance mechanisms are analyzed in detail. Finally, it draws conclusions relevant to the modern corporation. The theoretical foundations are based upon principal agency theory, psychological economics, as well as embeddedness theory.Findings – The monasteries that are examined show an average lifetime of almost 500 years and only a quarter of them dissolved as...