there is a lot of discussion in the text on whether implicit and explicit incentives (corp governance) are substitutes or complements… looks like they are more substitutes than complements… any thoughts otherwise?
substitutes yeah. you’re a manager and have pressure you might get fired, that motivates you such that maybe you don’t need those extra stock options to work just a little bit harder.
it really depends … could be either depending on the bargaining power of either sides, general eonomic conditions (amidst high unemployment prevalent all around, a manager would be willing to serve at lower package and also facing high job insecurity - in this scenario, explicit and implicit incentives would actually be serving as complements)
dmn it i misread the heading and was all set to read about EXPLETIVES oh well
so basically its how u can argue either ways… if it is not a part of the multiple choice that is!
If the manager has a lower package isn’t that reducing the explicit incentive, while higher job insecurity increases the implicit incentive? Higher risk of being fired seems like an incentive to me.