The setting of a coalition contract between controlling shareholder, managers and executives: How to mix incentive and political logics?
de La Bruslerie, Hubert (2011), The setting of a coalition contract between controlling shareholder, managers and executives: How to mix incentive and political logics?, International Journal of Corporate Governance, 2, 3-4, p. 237-267. http://dx.doi.org/10.1504/IJCG.2011.044377
TypeArticle accepté pour publication ou publié
Journal nameInternational Journal of Corporate Governance
MetadataShow full item record
Author(s)de La Bruslerie, Hubert
Abstract (EN)The leveraging of control is the possibility for the controlling shareholder to lower his direct participation in capital through a convergence of financial and economic interest with other shareholders in the firm. In this paper, the setting of a coalition contract is done by awarding stocks to managers and executives. This paper analyses it jointly, on one side, in a rationale of economic incentive and, on the other side, in a rationale of political coalition of the initial dominant shareholder with managers and executives/employees. It is shown that the two logics are not opposite but complementary. The sharing of the private benefits within members of the new coalition is at the heart of a new implicit contract. The initial controlling shareholder “buys” efficient efforts by awarding a stake of capital to managers or executives, but also by allowing them to share a part of the private benefits and to join a new dominant group. Even if the effort function of the executives is weakly productive, a targeted broad diffusion of new stocks may still respect the coherence between an economic incentive rationale and a political substitution rationale.
Subjects / KeywordsOwnership structure; private benefits; stock ownership plans; employees’ incentives; coalition contract; control
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