From shareholder value to CEO power: The paradox of the 1990s

Why did CEOs remuneration exploded during the 90s and persisted to high levels, even after the bursting out of the Internet bubble? This article surveys the alternative explanations that have been given of this paradox mainly by various economic theories with some extension to political science, business administration, social psychology, moral philosophy, network analysis. Basically, it is argued that the diffusion of stock-options and financial market related incentives, that were supposed to discipline managers, have entitled them to convert their intrinsic power into remuneration and wealth, both at the micro and macro levels. This is the outcome of a de facto alliance of executives with financiers, who have thus exploited the long run erosion of wage earners'bargaining power. The article also discusses the possible reforms that could reduce the probability and the adverse consequences of CEOs and top-managers opportunism: reputation, business ethic, legal sanctions, public auditing of companies, or shift from a shareholder to a stakeholder conception.Managers'control and remuneration ; stock-options ; history of quoted corporations ; optimal contract theory ; economic and political power of managers ; Internet bubble

Growth strategies and poverty reduction: the institutional complementarity hypothesis

This article starts from the limits of the policies that assume a significant de-connection between antipoverty strategies and the logic of the growth regime and that mainly rely upon market mechanisms. By contrast, a branch of the new institutional economics argues that a complete set of coordinating mechanisms is constitutive of really existing economies and that they are more complementary than substitute. The Institutional Complementarity Hypothesis (ICH) may be useful for analyzing simultaneously the antipoverty policies and the viability of growth regimes. The different brands of capitalism are the outcome of complementary institutions concerning competition, labor market institutions, welfare and innovation systems. Generally, such configurations cannot be emulated by poor developing countries, but reviewing the preliminary findings of the UNRISD country case studies suggests some common features to all successful experiments. Basically, antipoverty policies are efficient when they create the equivalent of virtuous circles within which growth entitles antipoverty programs and conversely these programs sustain the speed and stability of growth. Two methods are proposed in order to detect possible complementarities and design accordingly economic policies: the Qualitative Comparative Analysis (QCA) on one side, national growth diagnosis on the other side. A special attention is devoted to the timing of policies and the role of policy regimes. A brief conclusion wraps up the major findings and proposes a research agenda.development theory ; antipoverty policy ; Washington consensus ; new institutional economics ; institutional complementarity hypothesis ; qualitative comparative analysis ; growth diagnosis

Employment and decent work in the era of flexicurity

This paper challenges the conventional wisdom that the dynamism of employment is always contradictory to the enforcement of some forms of security for workers. Contemporary theorizing now recognizes the specificity of the wage-labour nexus. Consequently, minimum security is required for good economic performance by firms and national economies. A comparative analysis of OECD countries shows that the extended security promoted by welfare systems has not been detrimental to innovation, growth and job creation. Developing countries cannot immediately catch up with the emerging standards of flexicurity but the methodology of employment diagnosis might help them in designing security/flexibility configurations tailored according to their domestic economic specialization, social values and political choices.Workers security ; labour flexibility ; decent work ; developing countries ; labour standards ; employment diagnosis ; productive employment ; welfare ; flexicurity

What future for codetermination and corporate governance in Germany?

Contrary to the prognosis derived from the variety of capitalism literature, since the mid-90s the significant restructuring of large German corporations in the direction of shareholder value seems to have been compatible with the persistence of a genuine configuration of industrial relations, including co-determination at the firm level. This article investigates whether this is a long lasting compatibility and tests various research programs in institutional economics and thus explores the consequences alternative hypotheses about institutional complementarity or hierarchy, comparative institutional analysis, comparative historical analysis, hybridization and finally régulation theory. Even if the process is highly uncertain, one major conclusion emerges: the old German model is probably irreversibly transformed and is evolving towards an unprecedented configuration, with only mild and distant relations to a typical liberal brand of capitalism.variety of capitalisms ; codetermination ; shareholder value ; german capitalism ; institutional complementarity / hierarchy ; comparative institutional analysis ; hybridization ; "régulation" theory ; german crisis

Democracy and social democracy facing contemporary capitalisms: A "régulationist" approach

This article surveys some old and recent political economy research about the long term transformations and contemporary diversity in the mutual relationships between State, civil society and the economy. The hypothesis of institutional complementarity is extended from the institutional forms that sustain "regulation" modes to the analysis of the spill over from the polity to the economy and conversely from the economy to the polity. In spite of common challenges originating from individualization, globalization and financiarization, contrasted national trajectories for socio-economic and political regimes still coexist in contemporary world. The assessment of the relative merits of liberal capitalism, social-liberalism and renewed social-democracy suggests that the later regime is the best suited to limit the process of de-democratization to follow the concept coined by Charles Tilly in his 2007 book on "Democracy". Would social-democracy be the best rampart against the contemporary disenchantment about democracy? This unconventional hypothesis has to be mitigated by the fact that social-democracy - but also liberal democracy - cannot be imported as such. Its basic principles have to follow a process of hydridization according to various national traditions, let them be statist in France or meso-coporatist in Japan since the new demands from diverse civil societies have to be taken into account.variety of capitalisms ; long run evolutions of capitalism ; institutional complementarity hypothesis ; socioeconomic-political regimes ; liberalism, variety of democracies ; old and new social-democracy ; régulation theory

Labor Economics

The authors hypothesize that most labor economists sooner or later had to incorporate at least the appearance of institutional concerns in their papers to avoid indigestion whenever lunching with colleagues outside the field of economics They add: If the new interests of modern labor economics are in fact driven by the imperatives of science, then the institutionalist and the neoclassical approaches may well synthesize

The Economics of Free and Open Source Software: Contributions to a Government Policy on Open Source Software

This document seeks to lay the groundwork for a government policy on free and open source software. We briefly characterize the extent of the open source software phenomenon. We analyse its pros and cons for the government, in its role as both an engine of economic development and a large user of information and communications technologies. We conclude with a series of recommendations for the government, as both “economic and industrial policy maker” and “large user.”free software, intellectual property rights, free source code, open source code, free operating system, GPL licence, BSD licence, innovation, forking,

Ex Ante Incentives and Ex Post Flexibility

Our objective in this paper is to illustrate and better understand the unavoidable arbitrage between incentives and flexibility in contexts of asymmetric information and to characterize the general features of an appropriate response to this challenge. We show that procedures and institutions in organizations which reduce the capacity to implement change may be necessary to generate the optimal level of inertia. We show that more flexibility in adapting to changing conditions or new information, typically known or observed by either the agent or the principal but not both, may come at the expense of efforts exerted up front by the agent to make the organization more successful. There is a trade-off in this context between ex ante efforts and ex post flexibility of adaptation. Nous développons dans cet article un modèle principal-agent permettant de mieux cerner l'arbitrage inéluctable entre incitations et flexibilité en situation d'information asymétrique. Nous caractérisons la meilleure réponse de l'organisation face à ce défi en termes d'un niveau optimal d'inertie. Une plus grande flexibilité d'adaptation aux changements dans l'environnement ou l'information, que ces changements soient observés par le principal ou l'agent, peut réduire les efforts non-observables consentis par l'agent pour assurer le succès de l'organisation.Incentives, Flexibility, Adaptation, Asymmetric Information, Incitations, Flexibilité, Adaptation, Information asymétrique