The misapplication of Mr. Michael Jensen: how agency theory brought down the economy and why it might again

Dobbin, Frank; Jung, Jiwook

doi:10.1108/s0733-558x(2010)000030b006

Cited by 121 publications

(108 citation statements)

References 48 publications

Supporting

Mentioning

107

Contrasting

Unclassified

Order By: Relevance

“…Yet, many large U.S. corporations now compete in progressively more uncertain environments as advances in information and communication technologies, globalization, and deregulation have raised product market competition and shortened product life cycles (Osterman et al 2001). Financial market pressures have also increased, placing even greater pressure on firms to maintain a shorter-term focus on market performance (Davis 2009b;Dobbin and Jung 2010;Lin and Tomaskovic-Devey 2013;Sørensen 2000). The heightened uncertainty these changes place on firms has motivated many large U.S. companies to shift some of that uncertainty onto their workers (Cobb 2015;Hacker 2008).…”

Section: Changing Firm-size Wage Effect Over Timementioning

confidence: 99%

Growing Apart: The Changing Firm-Size Wage Premium and Its Inequality Consequences

Cobb

Lin

2017

Organization Science

View full text Add to dashboard Cite

Wage inequality in the United States has risen dramatically over the past few decades, prompting scholars to develop a number of theoretical accounts for the upward trend. This study argues that large firms have been a prominent labor-market institution that mitigates inequality. By compensating their low-and middle-wage employees with a greater premium than their higher-wage counterparts, large U.S. firms reduced overall wage dispersion. Yet, broader changes to employment relations associated with the demise of internal labor markets and the emergence of alternative employment arrangements have undermined large firms' role as an equalizing institution. Using data from the Current Population Survey and the Survey of Income and Program Participation, we find that in 1989, although all private-sector workers benefited from a firm-size wage premium, the premium was significantly higher for individuals at the lower end and middle of the wage distribution compared to those at the higher end. Between 1989 and 2014, the average firm-size wage premium declined markedly. The decline, however, was exclusive to those at the lower end and middle of the wage distribution, while there was no change for those at the higher end. As such, the uneven declines in the premium across the wage spectrum could account for about 20% of rising wage inequality during this period, suggesting that firms are of great importance to the study of rising inequality.Keywords firm-size wage premium, inequality, internal labor market, employment relationship Disciplines Management Sciences and Quantitative MethodsThis journal article is available at ScholarlyCommons:

show abstract

Section: Changing Firm-size Wage Effect Over Timementioning

confidence: 99%

Growing Apart: The Changing Firm-Size Wage Premium and Its Inequality Consequences

Cobb

Lin

2017

Organization Science

View full text Add to dashboard Cite

show abstract

“…Indeed bankarization goes against the imperative of de-diversification and concentration on core business activities promoted by the shareholder value doctrine and supported in particular by financial analysts (Zuckerman 1999;Dobbin and Jung 2010). Crotty (2005), however, proposes to reconcile the two dimensions by explaining that financialization subjects non-financial firms to new constraints (shareholder orientation) while allowing them to take advantage of new opportunities (bankarization).…”

mentioning

confidence: 99%

“…It gives priority to shareholder remuneration through the payment of dividends or share repurchases. It also promotes the use of debt (as a source of funding and as a discipline) and generous incentive pay packages for CEOs (Jensen and Murphy 1990;Dobbin and Jung 2010). This new orientation not only reduces productive investment (Orhangazi 2008;Hecht 2014) but could also promote inequality through several channels: increased dividend payments that feed the incomes of the wealthy, more incentive and higher compensations for CEOs and executive officers, and shrinking salaries of middle and lower classes under the pressure of restructuring.…”

mentioning

confidence: 99%

Financialization Is Marketization! A Study of the Respective Impacts of Various Dimensions of Financialization on the Increase in Global Inequality

Godechot¹

2016

SocScience

View full text Add to dashboard Cite

Abstract:In this article, I study the impact of financialization on the rise in inequality in 18 OECD countries from 1970 to 2011 and measure the respective roles of various forms of financialization: the growth of the financial sector; the growth of one of its subcomponents, financial markets; the financialization of non-financial firms; and the financialization of households. I test these impacts using cross-country panel regressions in OECD countries. I show first that the share of the finance sector within the GDP is a substantial driver of world inequality, explaining between 20 and 40 percent of its increase from 1980 to 2007. When I decompose this financial sector effect, I find that this evolution was mainly driven by the increase in the volume of stocks traded in national stock exchanges and by the volume of shares held as assets in banks' balance sheets. By contrast, the financialization of non-financial firms and of households does not play a substantial role. Based on this inequality test, I therefore interpret financialization as being mainly a phenomenon of marketization, redefined as the growing amount of social energy devoted to the trade of financial instruments on financial markets.

show abstract

“…Apart from the meta-analyses, empirical evidence also shows that the incentives suggested in the J/M model, such as stock options, bonuses, and high-powered monetary incentives tied to the market value of the firm, may lead agents to focus on short-term quarterly profits that may benefit shareholders in the short term but may destroy firm market value and, consequently, firms in the long run (Becht, Bolton, and Röell 2003;Dobbin and Jung 2010;Ghoshal 2005;Roberts 2010). …”

Section: Literature Review: the Phenomenon Of Corporate Governance Symentioning

confidence: 99%

Corporate governance systems as dynamic institutions: Towards a dynamic model of corporate governance systems

Emenalo

2014

AJOBE

View full text Add to dashboard Cite

Taking note of the evidence in extant literature that corporate governance systems are designed to incentivise, monitor, and guide agents to achieve firm mission, this paper develops a dynamic model of corporate governance systems that views these systems as artificial realities (Simon 1996) in general, and institutions in particular. The paper suggests that viewing these systems as institutions has theoretical and practical implications for the study and design of these systems, and illuminates how the process of double hermeneutic may explain the link between corporate governance research and policy recommendations to date and the US sub-prime crisis of 2007 onwards.

show abstract

The misapplication of Mr. Michael Jensen: how agency theory brought down the economy and why it might again

Cited by 121 publications

References 48 publications

Growing Apart: The Changing Firm-Size Wage Premium and Its Inequality Consequences

Growing Apart: The Changing Firm-Size Wage Premium and Its Inequality Consequences

Financialization Is Marketization! A Study of the Respective Impacts of Various Dimensions of Financialization on the Increase in Global Inequality

Corporate governance systems as dynamic institutions: Towards a dynamic model of corporate governance systems

Contact Info

Product

Resources

About