Organizational Governance and Trade-Offs Between Pay and Subjective Employee Well-Being

Suppose you were offered a job or a promotion that gave you higher intrinsic rewards, but required accepting less pay than you could get elsewhere. Might you have concerns that the employer would, at some point, renege on its promise of higher intrinsic rewards—which are harder to observe than pay—leaving you with just lower pay? Even if the manager is being sincere at the time, later on there could be new pressures, perhaps because of profitability concerns, new executives, or a change in ownership. 

One thing that might shape your willingness to accept this deal is whether you think the organization’s reputation is important to it, such that it will live up to its promises in order to maintain a good reputation in the labor market. However, David Marsden, a longtime professor of employment relations at the London School of Economics, argued that a stronger signal of an organization’s likely commitment to implicit contracts is its governance structure, which is stable, easy to observe, and difficult to change, unlike perceptions about a desire to maintain some amorphous sense of reputation.

For example, in an investor-owned company with a strong shareholder value ethos, the managers are the agents of investor-owners and are tasked with acting on their behalf to generate financial returns. Because of financial concerns and the ability to buy and sell ownership and assets, employees should be wary of implicit contracts in which the promise of intrinsic rewards offsets lower pay because of managerial incentives and the prospect that new corporate owners or executives will ignore these non-transferable agreements. To the extent that family-owned firms may face weaker shareholder pressures while also embodying stronger social connections, visible ownership identities, and enduring inter-generational transfers of ownership, workers may be more willing to trust implicit contracts at family-owned corporations. 

In nonprofit and charitable organizations, conventional owners do not exist as there are not profits to distribute, but donors can be seen as key stakeholders to whom managers are accountable. Moreover, assets are largely non-tradeable and a social mission is explicitly part of the organization’s mandate. So discretionary actions allowed by this model of organizational governance are expected to serve the public good. In an earlier article, my colleague Avner Ben-Ner argued that “an organization’s nonprofit status may serve as a signal of trustworthiness to customers that their well-being will not be compromised by the organization’s pursuit of profit,” and the Marsden theorizing is that this applies to employees, too. Public sector organizations with socially-oriented missions, as in public education, health care, and social services, are theorized to be similar to nonprofit and charitable organizations such that the pursuit of the organization’s mission is likely to remain consistent with respecting commitments made to employees. But public sector agencies with more of a bureaucratic or regulatory function are more likely to have new governments change their orientation, similar to new owners or executives in a private-sector corporation.

Marsden’s theorizing, then, is that organizational features that are easy to observe contain information about the likelihood that the organization will fulfill its promises, and thus we should observe different combinations of extrinsic and intrinsic rewards across different types of organizations. In other words, employees will be less likely to expect breaches of implicit contracts promising higher levels of intrinsic rewards in lieu of pay when certain organizational features are present. Ryan Lamare and I explore this in a new article “Organizational Governance and Trade-Offs Between Pay and Subjective Employee Well-Being: A Comparative Analysis” which will appear in an issue of the British Journal of Industrial Relations honoring Professor Marsden. I’ve created a short animation that provides an overview of our article. 

In short, we find supportive evidence across 35 European countries. Moreover, the trade-offs across organizational types appear larger in liberal market economies, like the UK, where there is a stronger shareholder orientation and capital is impatient, compared to coordinated market economies, like Germany, where governance arrangements are somewhat more insulated and capital is more patient. At the same time, employee well-being across all organizational types appears greater in coordinated market economies, which isn’t surprising given the relatively greater strength of labor unions and other pro-worker institutions in that type of country.

Advocates for improving work often focus on work-related laws and institutions such as unions. But we shouldn’t overlook how organizational governance, such as a strong shareholder ethos, also affects human resources and worker well-being.

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Source: John W. Budd and J. Ryan Lamare (2025) "Organizational Governance and Trade-Offs Between Pay and Subjective Employee Well-Being: A Comparative Analysis," British Journal of Industrial Relations. https://doi.org/10.1111/bjir.12860. 

The article is open access, or you can watch our animated video overview.

Homo Economicus Sings the Blues, And We All Suffer For It

 In last month’s post, I contrasted the positive, intrinsic view of work that underlies high-road HR strategies with the negative, instrumental view of work frequently seen in songs about work. Continuing with the theme of how we think about work, varying perspectives on work often correspond with assumptions about work embedded in different academic disciplines. In general terms, economics treats work as a commodity and as a lousy activity endured because of a need for money, whereas psychology focuses on personal fulfillment, and sociology on social norms.

Most songs on work are consistent with how most economists think about work. And thus, work songs are a revealing way to illustrate the dominant assumptions about work inherent in economic analyses—work as a commodity, as a pain cost, and as an opportunity cost.

In a commodity conceptualization of work, labor is an abstract quantity of productive value governed by the impersonal forces of supply and demand. We can see this reflected in songs that lament factory closings due to cheaper labor elsewhere, such as Billy Joel’s Allentown or Harry Chapin’s The Day They Closed the Factory Down:

      So they're moving somewhere else now
      With their cloths and fabric press
      They found themselves another town
      Where they'll make shirts for less

In terms of the actual work experience, the mainstream economics view of work is that it’s the opposite of something that brings you positive utility. That is, the direct experience of work makes you worse off. Traditionally this was seen as a pain cost. We can see this reflected in songs about long hours, hot and dangerous working conditions, or, as in Dolly Parton’s 9 to 5, bad bosses and disrespect:

      Workin' 9 to 5, what a way to make a livin'
      Barely gettin' by, it's all takin' and no givin'
      They just use your mind and they never give you credit
      It's enough to drive you crazy if you let it
 
      9 to 5, for service and devotion
      You would think that I would deserve a fair promotion
      Want to move ahead but the boss won't seem to let me
      I swear sometimes that man is out to get me
 
      They let your dream, just watch 'em shatter
      You're just a step on the boss man's ladder
      But you got dreams he'll never take away

In modern economic theorizing, work doesn’t have to be inherently bad (a pain cost), but working can still make you worse off it reduces the amount of time you can spend doing things that you find more enjoyable (an opportunity cost):

      It's always better on holiday, so much better on holiday
      That's why we only work when we need the money
      It's always better on holiday, so much better on holiday
      That's why we only work when we need the money
      (from Jacqueline by Franz Ferdinand)

So why work? To earn money to live. That is, Workin’ for a Livin’ in the words of Huey Lewis & The News. But don’t oversimplify and take this to mean that economics predicts that people won’t work hard. Rather, economics predicts that people will work hard when the pay is worth it, as captured by Gretchen Wilson’s Work Hard, Play Harder.

While songs can usefully illustrate these perspectives on work that underlie economic approaches to work, perhaps they run the risk of normalizing these approaches. If the nature of work is seen as beyond our control, then instead we might just focus on Working for the Weekend. But there ought to be better ways. Partly this entails increasing our demands for better work. But we also need to dig deeper. In particular, making work into a commodity in our collective imaginations dehumanizes it, reducing workers to productive inputs tracked in headcount analyses and income statements. This sterile conceptualization is not innocuous—in contrast, it’s a key conceptual step towards exploitation. That is, it’s harder for leaders to exploit workers who they see as human rather than as numbers in spreadsheet.

      I work my back till it's racked with pain
      The boss can't even recall my name
      I show up late and I'm docked, it never fails
      I feel like just another, spoke in a great big wheel
      Like a tiny blade of grass in a great big field
 
      To workers I'm just another drone
      To Ma Bell I'm just another phone
      I'm just another statistic on a sheet
      To teachers I'm just another child
      To IRS I'm another file
      I'm just another consensus on the street
      (from Feel Like a Number by Bob Seger)

Also, economics perspectives on work implicitly or explicitly emphasize individual free choice. If you don’t like your job, tell your boss to Take this Job and Shove It, and then find something better. But we need to recognize that labor markets don’t always work as nicely as mainstream economics wants to assume. There can be power differential in societal institutions and discrimination. Not everyone has the same options. Not everyone is rewarded fairly. Economic theorizing on work (e.g., personnel economics), and mainstream economics more generally, often sanitizes this by ascribing different outcomes to different personal choices or productive characteristics rather the systemic inequalities.

Unsurprisingly given their roots in real life experiences, there are songs that can remind us of the imbalances that workers must navigate. Class-based inequalities are evident in Worker's Song by Dropkick Murphys:

      We're the first ones to starve, we're the first ones to die
      The first ones in line for that pie in the sky
      And we're always the last when the cream is shared out
      For the worker is working when the fat cat's about

Margo Price’s Pay Gap and Cher’s Working Girl address gender inequality. And Nina Simone’s Backlash Blues starkly reminds us of race-based inequalities and discrimination which must not be overlooked:

      You give me second class houses
      And second class schools
      I know you think that all colored people
      Are just second class fools
      Mr. Backlash, I’m gonna leave you
      With the blues, yes I am
 
      When I try to find a job
      To earn a little cash
      All you got to offer
      Is your mean old white backlash
      But the world is big
      Big and bright and round
      And it’s full of other folks like me
      Who are black, yellow, beige, and brown
      Mr. Backlash, I’m gonna leave you
      With the blues, yes I am

In conclusion, then, the economics assumption about work being lousy is richly illustrated in a wide range of songs about work. But as a society, we should challenge why work is so lousy while also questioning the implications of other longstanding hallmarks of traditional economic thought—seeing work as a commodity, defaulting to assumptions of competitive markets, and embracing self-interest as the fabric of societal interactions. Homo economicus has many reasons to be singing the blues, and we all pay the price.

The Divergence Between Work Songs and High-Road HR Strategies

Different HR strategies for managing people are founded, at least in part, on different ways in which we think about work. Is work simply an input into a productive process that’s tracked and traded like other commodities? Or something bad that individuals do primarily for income? Or a source of personal satisfaction? A way to serve others? A way to fulfill societal expectations?

Low-road, market-drive HR strategies are based on the depersonalized commodity view, incentive-based HR strategies are rooted in seeing work as a necessary evil to earn income, and high-engagement or commitment strategies are based on views of work that see the potential for personal and broader satisfaction. 

Ultimately, work is exceptionally complex and multi-layered, so I think it’s best to see these alternative perspectives as all being relevant—that is, we should see them as complements rather than competitors. But just for fun, I’ve noticed that it’s very difficult to find songs (or comics or other forms of pop culture) that celebrate any joys of working. One of the only songs with a positive view of work I can find is The Happy Working Song, which is from the Disney movie Enchanted (as an aside, I’ve seen Everything is Awesome from the Lego Movie suggested as a positive work song, but it might really be about conformity—and in either case, we’re still left with positive work songs only in kids movies).  

In sharp contrast, there are many, many songs about work being commodified, lousy, and something to avoid, from old folk ballads, blues, and disco to 2020s post-grunge with lots of genres in between. That is, work through the lens of songs definitely favors the economics views of work. Indeed, these views can be illustrated by a single artist: Bruce Springsteen.

In The River, we can see work as a commodity left in the hands of market forces:

      I got a job working construction
      For the Johnstown Company
      But lately there ain't been much work
      On account of the economy
      Now all them things that seemed so important
      Well mister they vanished right into the air
      Now I just act like I don't remember
      Mary acts like she don't care

In Factory, we see the daily punishment and toil of work:

      Early in the morning factory whistle blows
      Man rises from bed and puts on his clothes
      Man takes his lunch, walks out in the morning light
      It's the working, the working, just the working life
 
      Through the mansions of fear, through the mansions of pain
      I see my daddy walking through them factory gates in the rain
      Factory takes his hearing, factory gives him life
      The working, the working, just the working life

And hot (or cold) repetitive toil is evident in Working on the Highway:

      I work for the county out on 95
      All day I hold a red flag and watch the traffic pass me by
      In my head I keep a picture of a pretty little miss
      Someday, mister, I'm gonna lead a better life than this
 
      Working on the highway, laying down the blacktop
      Working on the highway, all day long I don't stop
      Working on the highway, blasting through the bedrock
      Working on the highway, working on the highway

In modern economic thought, work doesn’t need to be directly painful (or boring or stressful or…), it can simply be an opportunity cost. That is, work might be OK, but it’s a costly use of your time if non-work activities are better. We can (sort of) see this in Night, where night-time drag racing is a lot more enjoyable than working (though work here is negative, too):

      You get up every morning at the sound of the bell
      You get to work late and the boss man's giving you hell
      'Til you're out on a midnight run
      Losing your heart to a beautiful one
      And it feels right as you lock up the house
      Turn out the lights and step out into the night

In these Springsteen songs, we can also see the reason for working—to make money to support your family and your more pleasurable pursuits, which again is a theme in many other songs by diverse artists. It’s not a source of deep rewards, as sought by high-road HR strategies.

 We can question whether popular music accurately represents views of work across the population—maybe the mournful aspects of work just make for better songs—but the extent to which these songs resonate with so many people should cause us to question the match between the assumptions of high-road HR strategies and how significant numbers of people actually experience their work. Though by itself, this can't answer the question of whether high-road HR strategies are fundamentally flawed (e.g., due to inherent conflicts of interest between workers and employers) or are simply difficult to achieve in practice.