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When Should Leaders Share Information with Their Subordinates?

Authors


  • We thank Marco Celentani, Leonardo Felli, Eugenio Giolito, Belen Jerez, Ian Jewitt, Clare Leaver, Gilat Levy, Ulrike Malmendier, Margaret Meyer, Sujoy Mukerji, and Marco Ottaviani and participants at various seminars and conferences for valuable suggestions. We are especially grateful to Michele Piccione and Andrea Prat for their guidance and support.

Abstract

We show that when leaders share some of their information with subordinates, decision making is subject to a motivational bias; leaders make the decisions their subordinates want to see. As this bias increases with the quality of the shared information, an improvement of an organization's information might even decrease its efficiency. As a consequence, information sharing is not always optimal. We show however that self-confidence can help the leader to overcome his motivational bias, thus making information sharing more attractive. Conversely, we find that information sharing can help to curb the autocratic tendencies of a self-confident leadership. We conclude that a policy of information sharing and the appointment of a self-confident leadership are most effective when they go hand in hand.

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