Information, career concerns and organizational performance

This thesis explores how career concerns and information affect organizational performance. Its first two chapters analyze a principal-agent model in which the agent has career concerns along the lines of Holmstrom (1999) and in which the principal observes the agent's performance but the agent and the outside labor market do not. The first chapter shows that the presence of career concerns with asymmetric information creates a trade-off between turnover and incentives: in order for career concerns to increase, the firm must release talented workers in the future. The chapter applies its theoretical framework to examine the optimal level of labor market competition and firms' willingness to make general and firm-specific human capital investments. In the second chapter, the agent works for the principal for two periods, after which labor market competition for talent occurs. Within this environment, it explores the firm's incentives to disclose the agent's performance to the agent in between the two periods. It finds that a profit-maximizing disclosure policy (1) always provides some information to workers; (2) never identifies the worst performers; and (3) sometimes does not identify the best performers. In contrast to the first two, the third chapter (joint with Michael McMahon) explores information and career concerns on monetary policy committees. In particular, we ask whether a heterogeneous committee of experts can outperform a homogeneous one. We find that giving voting rights to members with different beliefs can improve social welfare due to moderation. We then examine whether differences in voting behavior between internal and external members on the Bank of England's Monetary Policy Committee are consistent with moderation, and find that they are not. In particular, some external members do not contradict internal ones. We present evidence that career concerns can explain this finding