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
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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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