Corporate Governance

Jean Tirole

No 2086, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The paper first develops an economic analysis of the concept of shareholder value, describes its approach and discusses some open questions. It emphasizes the relationship between pledgeable income, monitoring and control rights using a unifying and simple framework. The paper then provides a first and preliminary analysis of the concept of the stakeholder society. It investigates whether the managerial incentives and the control structure described in the first part can be modified so as to promote the stakeholder society. It is shown that the implementation of the stakeholder society strikes three rocks: dearth of pledgeable income, deadlocks in decision-making, and lack of clear mission for management. While it fares better on those three grounds, shareholder value generates biased decision-making; the paper analyzes the costs and benefits of various methods of protecting noncontrolling stakeholders: covenants, exit options, flat claims, enlarged fiduciary duty.

Keywords: control rights; Governance; Managerial Incentives; shareholder value; stakeholder society (search for similar items in EconPapers)
JEL-codes: D23 G32 (search for similar items in EconPapers)
Date: 1999-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Corporate Governance (2001)
Working Paper: Corporate Governance (2000)
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