Like principal, like agent? Managerial preferences in employee-owned firms

Abstract The relationship between firms’ owners and managers is a quintessential example of costly principal–agent interaction. Optimal design monetary incentives supervision mechanisms are the two traditional ways reducing agency costs in this relationship. In paper, we show evidence which consistent with third mechanism: firms have whose economic preferences aligned owners' interests. We uncover differences employed controlled by distinct classes ‘patrons’: employee-owned (worker cooperatives) conventional investor-owned firms. high-stakes lab-in-the-field experiment, find that co-op less risk-loving more altruistic than their counterparts. do not observe groups terms time preferences, reciprocity, trust. Our findings existing on worker cooperatives, such as tendency to self-select into risky industries compressed compensation structures.