I investigate whether organizations can use the “power of the employee” to reduce managers' opportunistic behavior toward others. I predict that revealing this behavior to employees makes managers less inclined to act opportunistically. Employees' knowledge has a stronger impact on reducing managers' opportunistic behavior when managers have discretion over employee rewards versus when they do not. I further predict that the effect of employee-based control depends on whether managers are other-interested versus self-interested. Revealing manager actions alone is sufficient to reduce other-interested managers' opportunism, even when they lack discretion over employee rewards. Revealing manager actions alone has no discernible influence on self-interested managers' opportunism, but pairing this action with granting them discretion over employee compensation does reduce their opportunism. Results of two experiments support my predictions, and these results have important implications. By relying on the power of the employee, organizations can induce (even selfish) managers to act less opportunistically.

Principals make decisions on various issues, ranging from contract design to control system implementation. Few studies examine the principal's active role in these decisions. We experimentally investigate this role by studying how a principal's choice of an incentive contract that may discourage misrepresentation, compared to a fixed‐salary contract, affects the honesty of his or her agents’ cost reporting. Results show that, besides an incentive effect and a principal trust effect, the active choice for incentives produces a negative “information leakage” effect. When principals use incentives, their choices not only incentivize truthful reporting and signal distrust, but they also leak important information about the social norm, namely, that other agents are likely to report dishonestly. Agents conform to this social norm by misrepresenting cost information more. Our results have important practical implications. Managers must recognize that their decisions can leak information to their agents, which may produce unanticipated consequences for the social norms of the organization.

In this paper, we investigate how increasing transparency about managers' treatment of their employees affects the tendency of employees to initiate collusion. Building on behavioral economics theory, we argue that employees who are treated less kindly by their managers are more willing to initiate or join a collusive agreement. We hypothesize that internal transparency affects collusion in two ways. First, by revealing how kindly employees are treated by their managers, transparency increases or decreases the probability that individuals are singled out as potential “partners in crime.” Second, increasing transparency incentivizes managers to treat employees more kindly, which in turn reduces employees’ inclination to initiate collusion. The results of two experiments generally support the theory. We discuss the implications of our study for research and practice.

Many companies administer wage policies based on tournaments or have different salaries attached to various promotion-based ranks within the company. Employees, however, do not always receive information about pay-level differences at higher ranks prior to joining the company. While some companies openly disclose prize spread information across these ranks, others keep such information secret. In this paper, we experimentally investigate whether the availability of tournament prize spread information enhances employee effort through both a selection effect and a motivation effect. We predict and find that when employees can select into tournaments of varying prize spreads (which proxies for an environment where prize spread information is available), high-ability employees are more likely than low-ability employees to select into the tournament with a larger prize spread. Thus, the availability of prize spread information produces a separation of employees based on ability. We also find that employees exert more effort when they can select into a tournament than when they are randomly assigned to one (which proxies for an environment where prize spread information is absent). We show that this result is driven by greater homogeneity in the ability of tournament contestants when the availability of tournament prize spread information provides self-selection opportunity. JEL Classifications: C91; D83; M40. Data Availability: Experimental data are available from the authors on request.