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Optimal Dissent in Organizations

Authors: Landier, Augustin
Sraer, David
Thesmar, David
Issue Date: 2-Nov-2005
Series/Report no.: CLB-06-008
Abstract: This paper is a theoretical exploration on the costs and benefits of “pas-sive resistance” in the chain of command. In our model, the organization consists of two employees: an informed decision maker (she) in charge of selecting a project, and an uninformed implementer (he) in charge of its execution. Both employees have intrinsic and possibly differing preferences over projects. Overall success depends on both project selection and its implementation. We find that a certain level of disagreement in the chain of command may be useful to (1) prevent bad decisions from being taken and (2) give credibility to the accuracy of the decision maker’s orders. Hence, there is an optimal level of dissent in organizations, which is larger when the extent of the decision maker’s private information is higher. We apply our analysis to two questions: (1) the political independence of government agencies and (2) the current debate on corporate governance.
Appears in Collections:NYU Pollack Center for Law & Business Working Papers

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