We contend that separation of decision and risk bearing functions survives in these organizations in part because of the benefits of specialization of management and risk bearing but also because of an effective common approach to controlling the implied agency problems

About 250 words “This paper analyzes the survival of organizations in which decision agents do not bear a major share of the wealth effects of their decisions. This is
what the literature on large corporations calls separation of “ownership” and “control.” Such separation of decision and risk bearing functions is also common to

organizations like large professional partnerships, financial mutuals and nonprofits. We contend that separation of decision and risk bearing functions survives in

these organizations in part because of the benefits of specialization of management and risk bearing but also because of an effective common approach to controlling

the implied agency problems. In particular, the contract structures of all these organizations separate the ratification and monitoring of decisions from the

initiation and implementation of the decisions.”

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