Organisational Ethics, Narratives and Social Dysfunctions

Steven Bosworth (University of Reading)
Dennis Snower (University of Oxford)

Abstract : The paper explores the joint determination of economic output, wages, corporate culture, employees' ethical standards and monitoring intensity in an analysis of organisational dysfunction. Economic activities are frequently accompanied by unethical and socially harmful activity, such as corruption, sexual harassment and environmental degradation. The ethical sensitivities of managers and their employees are shaped through their social interactions and thus organisational dysfunctions can arise. Such dysfunctions may be mitigated through changes in government policies or social norms. These changes become particularly effective if they encourage the managers and employees to adopt more ethical narratives. Narratives align managers' and employees' recognition of the social harm from unethical activities, determining their objectives and thereby their economic behaviours. The intersubjective quality of narratives means that policy interventions may either be amplified or counteracted by how discussion unfolds around the issue.

Workplace Incentives and Organizational Learning

Miguel A. Martinez-Carrasco (Universidad de los Andes)
Francesco Amodio (McGill University)

Abstract : This paper studies organizational learning when incentives change. We first illustrate how imperfect information over the true shape of the production function affects worker’s effort choice over time as information is disclosed and processed. We then show that changes in the compensation schedule can trigger such learning process. We take this hypothesis to the data using personnel records from a Peruvian egg production plant. Exploiting a sudden change in the worker salary structure, we find evidence that workers learn from each other over the shape of the production function, and change their effort accordingly. This adjustment process is costly for the firm. Our study shows that lack of information over the global shape of the production function increases the cost for firms associated with changing the shape of incentives at the workplace.

Investment and Information Acquisition

Dimitri Migrow (University of Calgary)
Sergei Severinov (University of British Columbia)

Abstract : We study the interaction between productive investment and persuasion activities in a principal-agent setting with strategic disclosure. In an attempt to persuade the principal, the agent diverts substantial resources from productive activities to information acquisition for persuasion, even though productive activities are more efficient and raise the chances of success in persuasion. We show that a higher cost of an investment project results in a lower productive investment. We further demonstrate how a commitment by the agent to disclose all acquired information, or a commitment by the principal to a decision rule, curtail the inefficiency and stimulate productive investment.