Commitment to a Prosocial Mission: The Facilitating Role of the Manager

This theoretical analysis provides a mechanism to make a profit maximizing owner able to commit to a prosocial policy. In this model the commitment to a prosocial policy is crucial to motivate the prosocially motivated employee in the organization. From the analysis follows that adopting a prosocial policy can be of high value for the owner from an ex-ante perspective. However, the owner has ex-post incentives to deviate from the prosocial policy which is harmful for the motivation of the employee. This is the case because the employee anticipates the deviation, and therefore will be demotivated or even refuses to participate in the organization. To tackle this problem, a manager with social motivations is introduced to the organization and made residual claimant. The owner delegates the decision rights about the implementation of projects to the manager. By providing the manager with financial incentives, the owner is able to make that the manager balance the financial and social interests optimally from the owner’s ex-ante perspective. Consequently, the owner is able earn more profits and conduct business in settings where this was previously impossible.