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Group incentive schemes have been shown to be positively associated with firm performance but it remains an open question whether this association can be explained by the motivating characteristics of the group-incentive scheme itself, or if this is due to factors that tend to accompany group-incentive schemes. We use a controlled experiment to directly test if group-incentive schemes can motivate sustained individual effort in the absence of rules, norms, and institutions that are known to mitigate free-riding behavior.

We use a controlled lab experiment that randomly assigns subjects to one of three compensation contracts used to incentivize an onerous effort task. Two of the compensation contracts are group-incentive schemes where subjects have an incentive to free-ride on the efforts of their coworkers, and the third (control) is a flat-wage contract.

We find that both group-incentive schemes resulted in sustained, higher performance relative to the flat-wage compensation contract. Further, we do not find evidence of free-riding behavior under the two group-incentive schemes.

Although we do find sustained cooperation/performance over the three work periods of our experiment under the group-incentive schemes, further testing would be required to evaluate whether group-incentive schemes can sustain cooperation over a longer time horizon without complementary norms, policies, or institutions that mitigate free-riding.

By unambiguously showing that group-incentive schemes can, by themselves, motivate workers to provide sustained levels of effort, this suggests that the “1/n problem” may be, in part, an artifact of the rational-actor modeling conventions.

Purpose – Institutional investors are facing increased pressure and threats of legislation from the European Union to abandon passive ownership strategies. This chapter investigates the legal prerequisites for active ownership among institutional investors in two Scandinavian countries to highlight differences in the legal framework that potentially account for apparent dissimilarities in the practice of shareholder activism.

Design/methodology/approach – Data on shareholder proposals from Danish and Swedish annual general meetings from 2006 throughout 2010 suggest that institutional investors are approximately a thousand times more active in Sweden than in Denmark.

Findings – The comparative study of the legal framework for shareholder activism shows diminutive legal distance in general, however, we find that the shareholder-based nomination committee employed in Sweden constitutes an exception. This is relevant, as such a setup transfers power from the board of directors to the owners. Presumably, this reduces the impact of free-rider and collective action problems, and increases the shareholders’ inclination to make proposals, which is also what we find. Moreover, we find other differences in the legal framework that support the transfer of power to the owners.

Research implications – We contribute to literature by investigating the importance of local governance mechanisms created by the legal framework – an area where research is scarce. The chapter discusses how two classical theoretical dilemmas – free-rider problems and collective action problems among shareholders – can be reduced by the implementation of local corporate governance elements.

Originality/value – The chapter outlines the actual practice of shareholder activism, in terms of proposals, in Denmark and Sweden, and highlights divergent legal elements which theoretically transfer power to the shareholders. Thus, regulators should be aware of the impact by local governance mechanisms, and how shareholders react under different legal prerequisites.

Blockholders can behave opportunistically because small shareholder voting suffers from coordination problems. In this chapter, we investigate the features of small shareholder voting using a theoretical framework. Specifically, we investigate when defeating a blockholder’s resolution is optional for shareholders. Regulatory initiatives that facilitate communication between small shareholders or focus on institutional investors and corporate governance tools that alter or add the threshold in the voting game also contribute to solving the coordination problem. These corporate governance initiatives can increase the relevance of AGMs in Europe.

From a theoretical agency perspective, the Annual General Meeting of Shareholders (‘AGM’) is an important corporate law solution for mitigating agency problems between shareholders and managers in large public corporations. At the AGM, shareholders are informed, they are offered a venue to discuss and ask questions, and they are involved in decision-making. Despite these theoretical important functions, the AGM is largely criticized in practice. Criticism contains, for example, rational apathy and free-rider behaviour that lead to low shareholder turnout, a lack of (meaningful) dialogue and side-stepping behaviour. Yet, fundamental empirical research on the AGM in practice is lacking, which makes this book highly relevant. This chapter provides the outline of the research that is conducted in this book.

The research predicts which public school teachers are likely to resign their union membership since agency fees were found unconstitutional in Janus v. AFSCME. We compare teachers in right-to-work states with comprehensive collective bargaining laws with teachers in former agency shop states, using unique district-teacher matched data constructed from the School and Staffing Survey. We find that teachers who are male, Hispanic, part-time, with alternative certification, work either in charter schools or in schools with more students qualifying for free lunches are more likely to become nonunion. Teachers who are black, work under a collective bargaining, have post-graduate degrees, are more experienced, work in larger schools or in areas with a higher cost of living, perceive more school problems or a poor school climate, work in an elementary school, or teach special education are more likely to remain union members now that agency shop provisions are unenforceable.

Here I present a theory of collective action that emphasizes the role of status. I argue that collective action contributions earn individuals improved status by signaling their concern for the group's welfare relative to their own. Having received greater prestige for their contributions to group goals, individuals’ actual motivation to help the group is increased, leading to greater subsequent contributions to group efforts and greater feelings of group solidarity. This “virtuous cycle” of costly contributions to group efforts and enhanced standing in the group shows one way in which individuals’ prosocial behaviors are socially constructed, a consequence of individuals’ basic concern for what others think of them. I discuss a variety of issues related to the theory, including its scope of application, theoretical implications, relationship to alternative models of reputation and prosocial behavior, possible practical applications, and directions for future research.

What enables some employee ownership firms to overcome the free rider problem and motivate employees to improve performance? This study analyzes the role of human resource policies in the performance of employee ownership companies, using employee survey data from 14 companies and a national sample of employee-owners. Between-firm comparisons of 11 ESOP firms show that an index of human resource policies, nominally controlled by management, is positively related to employee reports of co-worker performance and other good workplace outcomes (including perceptions of fairness, good supervision, and worker input and influence). Within-firm comparisons in three ESOP firms, and exploratory results from a national survey, show that employee-owners who participate in employee involvement committees are more likely to exert peer pressure on shirking co-workers. We conclude that an understanding of how and when employee ownership works successfully requires a three-pronged analysis of: (1) the incentives that ownership gives; (2) the participative mechanisms available to workers to act on those incentives; and (3) the corporate culture that battles against tendencies to free ride.

Since the 1950s, Ocean Spray cranberry growers have typically seen themselves in terms of their membership in the Ocean Spray cooperative rather than as cranberry growers. This association with the cooperative is so powerful that both members and independents alike believe that without Ocean Spray, the cranberry industry would not exist as it does today. Yet, as a way to recoup the losses resulting from the recent cranberry glut, some member-growers have proposed selling the cooperative. Although the sale would have generated a large sum of money for them, growers voted overwhelmingly against it. In order to understand why growers identify so closely with the cooperative, this paper intends to demonstrate how Ocean Spray’s influence transcended its role as a marketing cooperative to that of a significant social institution.

We develop elements of Network Exchange and Expectation States Theories to explain the relationship between power and status. While power and status are highly correlated, demonstrating that power can be used to attain high status has proven difficult, perhaps because negative reactions to power use limit power users’ influence. We propose three ways to reduce negative reactions to power use. One of them, philanthropy, suggests a solution to the “free-rider” problem in collective action. If philanthropic contributions increase status, then contributing to a public good may also. Thus, status attainment may be an incentive motivating public goods contributions.