Firms Behaving Nicely : Incentives and Commitment

Ever since the rise of large firms in the 18th century, debate has been raging about how to combine economic efficiency and productivity with socially desirable behavior of firms. This paper reviews the debate starting with the classic corporate go...

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Main Author: Klein, Michael
Format: Working Paper
Language:English
en_US
Published: International Finance Corporation, Washington, DC 2014
Subjects:
BID
CEO
TAX
Online Access:http://documents.worldbank.org/curated/en/2013/09/19541781/firms-behaving-nicely-incentives-commitment
http://hdl.handle.net/10986/19037
id okr-10986-19037
recordtype oai_dc
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic ACCOUNTING
ACCOUNTING STANDARDS
AGENCY PROBLEM
AGENTS OF SHAREHOLDERS
ASSET MANAGER
ASYMMETRIC INFORMATION
BANKRUPTCY
BANKS
BID
BOARD MEMBERS
BONDS
BORROWER
BUYBACKS
CASH FLOW
CEO
CEOS
CHECKS
CHIEF EXECUTIVE
COLLATERAL
COMMITMENT DEVICES
COMPANIES ACT
COMPANY LAW
COMPETITIVE MARKETS
CONFLICTS OF INTEREST
CONTRACTUAL SAVING
CONTROLLING MINORITY
CONTROLLING SHAREHOLDERS
COOPERATIVES
CORPORATE BEHAVIOR
CORPORATE CONDUCT
CORPORATE EXECUTIVES
CORPORATE FINANCE
CORPORATE FORM
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE MECHANISMS
CORPORATE GOVERNANCE PRINCIPLES
CORPORATE GOVERNANCE STANDARDS
CORPORATE ORGANIZATION
CORPORATE RAIDERS
CORPORATE SCANDALS
CORPORATE SOCIAL RESPONSIBILITY
CORPORATE STRUCTURE
CORPORATION
CORPORATIONS
COST OF CAPITAL
CREDIBILITY
CREDIT DEFAULT
CREDIT DEFAULT SWAPS
CREDITORS
CUSTODY
DEBT
DEBT CONTRACT
DEBT CONTRACTS
DEBT MARKETS
DEBT OBLIGATIONS
DEBT SERVICE
DEBT SERVICE PAYMENTS
DEFAULT RISK
DEFAULTS
DERIVATIVE
DEVELOPING COUNTRIES
DIVIDEND
DIVIDEND FIRMS
DIVIDEND PAYMENTS
DIVIDENDS
ECONOMIC EFFICIENCY
EMERGING MARKETS
EMPLOYMENT CONTRACTS
ENFORCEMENT SYSTEM
EQUITY CONTRIBUTIONS
EQUITY MARKETS
EQUITY SECURITIES
ETHICAL BEHAVIOR
EX ANTE
EX POST
EXCESS RETURN
EXPENDITURES
EXTERNAL FINANCE
FAMILY BUSINESSES
FAMILY FIRMS
FIDUCIARY DUTY
FINANCE CORPORATION
FINANCES
FINANCIAL CRISIS
FINANCIAL INSTITUTIONS
FINANCIAL PERFORMANCE
FINANCIAL RISK
FINANCIAL SECTOR
FOREIGN INVESTORS
FRAUD
FUND MANAGER
FUND MANAGERS
GLOBAL CORPORATE GOVERNANCE
GOOD CORPORATE GOVERNANCE
GOVERNANCE ARRANGEMENTS
GOVERNANCE STANDARDS
GOVERNMENT POLICIES
HOLDING
HOLDINGS
HOSTILE TAKEOVERS
HUMAN RESOURCE
INCORPORATED
INCORPORATION
INDIVIDUALS
INITIAL PUBLIC OFFERING
INSURANCE
INSURANCE COMPANIES
INSURANCE COMPANY
INTEREST PAYMENTS
INTEREST RATE
INTERESTS OF SHAREHOLDERS
INTERNAL FINANCE
INTERNATIONAL FINANCE
INVESTING
INVESTMENT FUNDS
INVESTMENT OPPORTUNITIES
INVESTMENT VEHICLES
ISSUANCE
JOINT STOCK COMPANIES
JOINT-STOCK COMPANIES
LARGE COMPANIES
LARGE SHAREHOLDER
LARGE SHAREHOLDERS
LEGAL FRAMEWORK
LEGAL FRAMEWORKS
LEGAL PROTECTION
LEGAL PROTECTIONS
LIMITED
LIMITED LIABILITY
LIQUIDATION
LIQUIDITY
LONG-TERM INTEREST
LONG-TERM INTERESTS
MAJORITY OF SHARES
MAJORITY SHAREHOLDERS
MARKET ANALYSTS
MARKET BENCHMARKS
MARKET COMPETITION
MARKET INFRASTRUCTURE
MICROFINANCE
MINORITY INVESTORS
MINORITY SHAREHOLDER
MINORITY SHAREHOLDERS
MOBILE PHONE
MODERN BUSINESS
MONETARY FUND
MONOPOLY
MONOPOLY POWERS
MORAL HAZARD
MORTGAGE
MORTGAGE MARKET
MUNICIPALITIES
MUTUAL FUNDS
NONPROFIT AGENCIES
NONPROFIT ORGANIZATION
NONPROFIT ORGANIZATIONS
NONPROFIT STATUS
PENSION
PENSION FUND
PENSION FUNDS
PENSIONS
POISON PILLS
PRICE-EARNINGS RATIOS
PRINCIPAL-AGENT
PRINCIPAL-AGENT PROBLEM
PRIVATE PROPERTY
PRIVATE SECTOR DEVELOPMENT
PROTECTING MINORITY SHAREHOLDERS
REGULATORY FRAMEWORKS
REGULATORY REFORMS
REPAYMENT
RETAIL INVESTORS
RETURN
RETURNS
RETURNS ON EQUITY
RIGHT OF SHAREHOLDERS
RISK PREMIUMS
SAVINGS
SEPARATION OF OWNERSHIP
SEVERANCE PAYMENTS
SHARE OF EQUITY
SHARE OF INVESTMENTS
SHARE VALUE
SHAREHOLDER
SHAREHOLDER CONTROL
SHAREHOLDER INTERESTS
SHAREHOLDER PROTECTIONS
SHAREHOLDER RELATIONSHIPS
SHAREHOLDER RIGHTS
SHAREHOLDER VALUE
SHAREHOLDERS
SHAREHOLDERS RIGHTS
SMALL INVESTORS
SOCIETIES
SOCIETY
SPECIFIC INVESTMENT
SPECIFIC INVESTMENTS
STAKEHOLDER
STAKEHOLDER MANAGEMENT
STAKEHOLDERS
STOCK EXCHANGES
STOCK MARKET
STOCK OPTIONS
STOCKHOLDERS
STOCKS
SUBSIDIARY
SUPERIOR ORGANIZATIONAL FORMS
SUPERVISORY BOARD
SUPERVISORY BOARDS
TAKEOVER
TAKEOVER BID
TAX
TRADING
TRANSACTION
TRANSACTION COSTS
TRANSPARENCY
TREASURY
TREASURY BILLS
TRUSTEES
WEALTH CREATION
WORLD MARKETS
spellingShingle ACCOUNTING
ACCOUNTING STANDARDS
AGENCY PROBLEM
AGENTS OF SHAREHOLDERS
ASSET MANAGER
ASYMMETRIC INFORMATION
BANKRUPTCY
BANKS
BID
BOARD MEMBERS
BONDS
BORROWER
BUYBACKS
CASH FLOW
CEO
CEOS
CHECKS
CHIEF EXECUTIVE
COLLATERAL
COMMITMENT DEVICES
COMPANIES ACT
COMPANY LAW
COMPETITIVE MARKETS
CONFLICTS OF INTEREST
CONTRACTUAL SAVING
CONTROLLING MINORITY
CONTROLLING SHAREHOLDERS
COOPERATIVES
CORPORATE BEHAVIOR
CORPORATE CONDUCT
CORPORATE EXECUTIVES
CORPORATE FINANCE
CORPORATE FORM
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE MECHANISMS
CORPORATE GOVERNANCE PRINCIPLES
CORPORATE GOVERNANCE STANDARDS
CORPORATE ORGANIZATION
CORPORATE RAIDERS
CORPORATE SCANDALS
CORPORATE SOCIAL RESPONSIBILITY
CORPORATE STRUCTURE
CORPORATION
CORPORATIONS
COST OF CAPITAL
CREDIBILITY
CREDIT DEFAULT
CREDIT DEFAULT SWAPS
CREDITORS
CUSTODY
DEBT
DEBT CONTRACT
DEBT CONTRACTS
DEBT MARKETS
DEBT OBLIGATIONS
DEBT SERVICE
DEBT SERVICE PAYMENTS
DEFAULT RISK
DEFAULTS
DERIVATIVE
DEVELOPING COUNTRIES
DIVIDEND
DIVIDEND FIRMS
DIVIDEND PAYMENTS
DIVIDENDS
ECONOMIC EFFICIENCY
EMERGING MARKETS
EMPLOYMENT CONTRACTS
ENFORCEMENT SYSTEM
EQUITY CONTRIBUTIONS
EQUITY MARKETS
EQUITY SECURITIES
ETHICAL BEHAVIOR
EX ANTE
EX POST
EXCESS RETURN
EXPENDITURES
EXTERNAL FINANCE
FAMILY BUSINESSES
FAMILY FIRMS
FIDUCIARY DUTY
FINANCE CORPORATION
FINANCES
FINANCIAL CRISIS
FINANCIAL INSTITUTIONS
FINANCIAL PERFORMANCE
FINANCIAL RISK
FINANCIAL SECTOR
FOREIGN INVESTORS
FRAUD
FUND MANAGER
FUND MANAGERS
GLOBAL CORPORATE GOVERNANCE
GOOD CORPORATE GOVERNANCE
GOVERNANCE ARRANGEMENTS
GOVERNANCE STANDARDS
GOVERNMENT POLICIES
HOLDING
HOLDINGS
HOSTILE TAKEOVERS
HUMAN RESOURCE
INCORPORATED
INCORPORATION
INDIVIDUALS
INITIAL PUBLIC OFFERING
INSURANCE
INSURANCE COMPANIES
INSURANCE COMPANY
INTEREST PAYMENTS
INTEREST RATE
INTERESTS OF SHAREHOLDERS
INTERNAL FINANCE
INTERNATIONAL FINANCE
INVESTING
INVESTMENT FUNDS
INVESTMENT OPPORTUNITIES
INVESTMENT VEHICLES
ISSUANCE
JOINT STOCK COMPANIES
JOINT-STOCK COMPANIES
LARGE COMPANIES
LARGE SHAREHOLDER
LARGE SHAREHOLDERS
LEGAL FRAMEWORK
LEGAL FRAMEWORKS
LEGAL PROTECTION
LEGAL PROTECTIONS
LIMITED
LIMITED LIABILITY
LIQUIDATION
LIQUIDITY
LONG-TERM INTEREST
LONG-TERM INTERESTS
MAJORITY OF SHARES
MAJORITY SHAREHOLDERS
MARKET ANALYSTS
MARKET BENCHMARKS
MARKET COMPETITION
MARKET INFRASTRUCTURE
MICROFINANCE
MINORITY INVESTORS
MINORITY SHAREHOLDER
MINORITY SHAREHOLDERS
MOBILE PHONE
MODERN BUSINESS
MONETARY FUND
MONOPOLY
MONOPOLY POWERS
MORAL HAZARD
MORTGAGE
MORTGAGE MARKET
MUNICIPALITIES
MUTUAL FUNDS
NONPROFIT AGENCIES
NONPROFIT ORGANIZATION
NONPROFIT ORGANIZATIONS
NONPROFIT STATUS
PENSION
PENSION FUND
PENSION FUNDS
PENSIONS
POISON PILLS
PRICE-EARNINGS RATIOS
PRINCIPAL-AGENT
PRINCIPAL-AGENT PROBLEM
PRIVATE PROPERTY
PRIVATE SECTOR DEVELOPMENT
PROTECTING MINORITY SHAREHOLDERS
REGULATORY FRAMEWORKS
REGULATORY REFORMS
REPAYMENT
RETAIL INVESTORS
RETURN
RETURNS
RETURNS ON EQUITY
RIGHT OF SHAREHOLDERS
RISK PREMIUMS
SAVINGS
SEPARATION OF OWNERSHIP
SEVERANCE PAYMENTS
SHARE OF EQUITY
SHARE OF INVESTMENTS
SHARE VALUE
SHAREHOLDER
SHAREHOLDER CONTROL
SHAREHOLDER INTERESTS
SHAREHOLDER PROTECTIONS
SHAREHOLDER RELATIONSHIPS
SHAREHOLDER RIGHTS
SHAREHOLDER VALUE
SHAREHOLDERS
SHAREHOLDERS RIGHTS
SMALL INVESTORS
SOCIETIES
SOCIETY
SPECIFIC INVESTMENT
SPECIFIC INVESTMENTS
STAKEHOLDER
STAKEHOLDER MANAGEMENT
STAKEHOLDERS
STOCK EXCHANGES
STOCK MARKET
STOCK OPTIONS
STOCKHOLDERS
STOCKS
SUBSIDIARY
SUPERIOR ORGANIZATIONAL FORMS
SUPERVISORY BOARD
SUPERVISORY BOARDS
TAKEOVER
TAKEOVER BID
TAX
TRADING
TRANSACTION
TRANSACTION COSTS
TRANSPARENCY
TREASURY
TREASURY BILLS
TRUSTEES
WEALTH CREATION
WORLD MARKETS
Klein, Michael
Firms Behaving Nicely : Incentives and Commitment
relation Global Corporate Governance Forum focus series;no. 12
description Ever since the rise of large firms in the 18th century, debate has been raging about how to combine economic efficiency and productivity with socially desirable behavior of firms. This paper reviews the debate starting with the classic corporate governance argument about shareholder rights. It discusses the potential incentives to exploit other stakeholders unduly and examines some mechanisms, beyond contracts and regulation, to cope with this exploitation. In this light it considers reputational mechanisms, using the example of corporate social responsibility, and changes to the constitution of firms, with emphasis on the nonprofit form of enterprise. Based on evidence so far, the for-profit firm with mechanisms assuring sound shareholder rights remains preferable to the alternatives. However, scope for experimentation with mechanisms such as different classes of shareholders with differing voting rights may be socially useful, which suggests that global corporate governance principles thus should not be prescriptive in detail.
format Publications & Research :: Working Paper
author Klein, Michael
author_facet Klein, Michael
author_sort Klein, Michael
title Firms Behaving Nicely : Incentives and Commitment
title_short Firms Behaving Nicely : Incentives and Commitment
title_full Firms Behaving Nicely : Incentives and Commitment
title_fullStr Firms Behaving Nicely : Incentives and Commitment
title_full_unstemmed Firms Behaving Nicely : Incentives and Commitment
title_sort firms behaving nicely : incentives and commitment
publisher International Finance Corporation, Washington, DC
publishDate 2014
url http://documents.worldbank.org/curated/en/2013/09/19541781/firms-behaving-nicely-incentives-commitment
http://hdl.handle.net/10986/19037
_version_ 1764443193993068544
spelling okr-10986-190372021-04-23T14:03:50Z Firms Behaving Nicely : Incentives and Commitment Klein, Michael ACCOUNTING ACCOUNTING STANDARDS AGENCY PROBLEM AGENTS OF SHAREHOLDERS ASSET MANAGER ASYMMETRIC INFORMATION BANKRUPTCY BANKS BID BOARD MEMBERS BONDS BORROWER BUYBACKS CASH FLOW CEO CEOS CHECKS CHIEF EXECUTIVE COLLATERAL COMMITMENT DEVICES COMPANIES ACT COMPANY LAW COMPETITIVE MARKETS CONFLICTS OF INTEREST CONTRACTUAL SAVING CONTROLLING MINORITY CONTROLLING SHAREHOLDERS COOPERATIVES CORPORATE BEHAVIOR CORPORATE CONDUCT CORPORATE EXECUTIVES CORPORATE FINANCE CORPORATE FORM CORPORATE GOVERNANCE CORPORATE GOVERNANCE MECHANISMS CORPORATE GOVERNANCE PRINCIPLES CORPORATE GOVERNANCE STANDARDS CORPORATE ORGANIZATION CORPORATE RAIDERS CORPORATE SCANDALS CORPORATE SOCIAL RESPONSIBILITY CORPORATE STRUCTURE CORPORATION CORPORATIONS COST OF CAPITAL CREDIBILITY CREDIT DEFAULT CREDIT DEFAULT SWAPS CREDITORS CUSTODY DEBT DEBT CONTRACT DEBT CONTRACTS DEBT MARKETS DEBT OBLIGATIONS DEBT SERVICE DEBT SERVICE PAYMENTS DEFAULT RISK DEFAULTS DERIVATIVE DEVELOPING COUNTRIES DIVIDEND DIVIDEND FIRMS DIVIDEND PAYMENTS DIVIDENDS ECONOMIC EFFICIENCY EMERGING MARKETS EMPLOYMENT CONTRACTS ENFORCEMENT SYSTEM EQUITY CONTRIBUTIONS EQUITY MARKETS EQUITY SECURITIES ETHICAL BEHAVIOR EX ANTE EX POST EXCESS RETURN EXPENDITURES EXTERNAL FINANCE FAMILY BUSINESSES FAMILY FIRMS FIDUCIARY DUTY FINANCE CORPORATION FINANCES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL PERFORMANCE FINANCIAL RISK FINANCIAL SECTOR FOREIGN INVESTORS FRAUD FUND MANAGER FUND MANAGERS GLOBAL CORPORATE GOVERNANCE GOOD CORPORATE GOVERNANCE GOVERNANCE ARRANGEMENTS GOVERNANCE STANDARDS GOVERNMENT POLICIES HOLDING HOLDINGS HOSTILE TAKEOVERS HUMAN RESOURCE INCORPORATED INCORPORATION INDIVIDUALS INITIAL PUBLIC OFFERING INSURANCE INSURANCE COMPANIES INSURANCE COMPANY INTEREST PAYMENTS INTEREST RATE INTERESTS OF SHAREHOLDERS INTERNAL FINANCE INTERNATIONAL FINANCE INVESTING INVESTMENT FUNDS INVESTMENT OPPORTUNITIES INVESTMENT VEHICLES ISSUANCE JOINT STOCK COMPANIES JOINT-STOCK COMPANIES LARGE COMPANIES LARGE SHAREHOLDER LARGE SHAREHOLDERS LEGAL FRAMEWORK LEGAL FRAMEWORKS LEGAL PROTECTION LEGAL PROTECTIONS LIMITED LIMITED LIABILITY LIQUIDATION LIQUIDITY LONG-TERM INTEREST LONG-TERM INTERESTS MAJORITY OF SHARES MAJORITY SHAREHOLDERS MARKET ANALYSTS MARKET BENCHMARKS MARKET COMPETITION MARKET INFRASTRUCTURE MICROFINANCE MINORITY INVESTORS MINORITY SHAREHOLDER MINORITY SHAREHOLDERS MOBILE PHONE MODERN BUSINESS MONETARY FUND MONOPOLY MONOPOLY POWERS MORAL HAZARD MORTGAGE MORTGAGE MARKET MUNICIPALITIES MUTUAL FUNDS NONPROFIT AGENCIES NONPROFIT ORGANIZATION NONPROFIT ORGANIZATIONS NONPROFIT STATUS PENSION PENSION FUND PENSION FUNDS PENSIONS POISON PILLS PRICE-EARNINGS RATIOS PRINCIPAL-AGENT PRINCIPAL-AGENT PROBLEM PRIVATE PROPERTY PRIVATE SECTOR DEVELOPMENT PROTECTING MINORITY SHAREHOLDERS REGULATORY FRAMEWORKS REGULATORY REFORMS REPAYMENT RETAIL INVESTORS RETURN RETURNS RETURNS ON EQUITY RIGHT OF SHAREHOLDERS RISK PREMIUMS SAVINGS SEPARATION OF OWNERSHIP SEVERANCE PAYMENTS SHARE OF EQUITY SHARE OF INVESTMENTS SHARE VALUE SHAREHOLDER SHAREHOLDER CONTROL SHAREHOLDER INTERESTS SHAREHOLDER PROTECTIONS SHAREHOLDER RELATIONSHIPS SHAREHOLDER RIGHTS SHAREHOLDER VALUE SHAREHOLDERS SHAREHOLDERS RIGHTS SMALL INVESTORS SOCIETIES SOCIETY SPECIFIC INVESTMENT SPECIFIC INVESTMENTS STAKEHOLDER STAKEHOLDER MANAGEMENT STAKEHOLDERS STOCK EXCHANGES STOCK MARKET STOCK OPTIONS STOCKHOLDERS STOCKS SUBSIDIARY SUPERIOR ORGANIZATIONAL FORMS SUPERVISORY BOARD SUPERVISORY BOARDS TAKEOVER TAKEOVER BID TAX TRADING TRANSACTION TRANSACTION COSTS TRANSPARENCY TREASURY TREASURY BILLS TRUSTEES WEALTH CREATION WORLD MARKETS Ever since the rise of large firms in the 18th century, debate has been raging about how to combine economic efficiency and productivity with socially desirable behavior of firms. This paper reviews the debate starting with the classic corporate governance argument about shareholder rights. It discusses the potential incentives to exploit other stakeholders unduly and examines some mechanisms, beyond contracts and regulation, to cope with this exploitation. In this light it considers reputational mechanisms, using the example of corporate social responsibility, and changes to the constitution of firms, with emphasis on the nonprofit form of enterprise. Based on evidence so far, the for-profit firm with mechanisms assuring sound shareholder rights remains preferable to the alternatives. However, scope for experimentation with mechanisms such as different classes of shareholders with differing voting rights may be socially useful, which suggests that global corporate governance principles thus should not be prescriptive in detail. 2014-07-28T22:25:22Z 2014-07-28T22:25:22Z 2013-09-26 http://documents.worldbank.org/curated/en/2013/09/19541781/firms-behaving-nicely-incentives-commitment http://hdl.handle.net/10986/19037 English en_US Global Corporate Governance Forum focus series;no. 12 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ International Finance Corporation, Washington, DC Publications & Research :: Working Paper