Profits, malversations, restitutions. Les bénéfices des financiers durant la guerre de la Ligue d’Augsbourg et la taxe de Chamillart

Profit, embezzlement, restitution. The role of the traitants in the Nine Years War and Chamillart’s tax on financial benefits The aim of this article is to revisit the question of the financiers in Old Regime France. It starts with an analysis of the discourses about the financiers under the Absolute monarchy that underlines the complexity of their relationship with the government and the public. It then reviews the secondary literature and highlights the existence of competing historical interpretations (functional, political, utilitarian), which raise the question of their overall capacity to account for the role and impact of the financiers at different times. On this ground, the article focuses on a specific group of financiers, the so-called traitants d’affaires extraordinaires, during the Nine Years War. Further to a description of the specific role and scope of the activities of the various financiers responsible for helping the monarchy to raise the funds it needed to pay for its peace and wartime expenditure, the article examines the conditions and profits granted by the king in his contracts with the traitants whose services were hired for the purpose of selling royal offices in the public and advancing the revenue to the Treasury. It also explores the contractual arrangements of the companies established by the financiers to manage their operations as well as the rights and the responsibilities of their various stakeholders. These bases being laid, the article relies on the administrative correspondence relating to the traités during the Nine Years War to address a range of issues, in particular the extent to which these contracts, and other control procedures, were robust enough to deter fraud. The accounts of two traitants’ companies offer an opportunity to analyse and compare the structure of their income and expenditure (including the volume and cost of the promissory notes sold in the public to finance their payments to the Treasury), to explore the strategies of the contractors, to calculate their net profits and further discuss the problem of embezzlement. The article ends with the study of the context and debates which led to the introduction by finance minister Michel Chamillart, in 1700, of a shortfall tax on the financial profits of the gens d’affaires or traitants, the method used to determine its rate (50 % of the net benefits), its distribution among the various stakeholders (including the bailleurs de fonds or backers), and the related procedures. In total, the article argues that the relationship between the monarchy, society and the financiers under the Ancien Regime was not static and, therefore, suggests that the broad question of control and fraud must be examined against changing circumstances. With regard specifically to the Nine Years War, the article concludes that within the constraints of the Absolute monarchy, contractors offered valuable services by raising capital for the benefit of a king who ruled over a country which, at the time, was by far the wealthiest in Europe, and where ministers failed to foresee long wars of attrition and whose financial strategy was limited by the very existence of privilege. Overall, the traités were too costly to be a viable system of war financing. In these conditions, the substantial fortunes made by a handful of very successful traitants suffice to explain that the government easily gave in to public criticism against the wealth of the financiers and felt compelled, when peace resumed, to cancel the advantageous conditions offered in the treaties by taxing financial profits.

Endogenous managerial compensation contracts in experimental quantity-setting duopolies

Given the ongoing debate on managerial compensation schemes, our paper offers empirical insights on the strategic choice of firms' owners over the terms of a managerial compensation contract, as a commitment device aiming at gaining competitive advantage in the product market. In a quantity setting duopoly we experimentally test whether firms' owners compensate their managers through contracts combining own profits either with revenues or with relative performance, and the resulting managerial behaviour in the product market. Prominent among our results is that firms' owners choose relative performance over profit revenue contracts more frequently. Further, firms' owners successfully induce a more aggressive behaviour by their managers in the market, by setting incentives which deviate from strict profit maximization.

Risk taking of executives under different incentive contracts: experimental evidence

Classic financial agency theory recommends compensation through stock options rather than shares to counteract excessive risk aversion in agents. In a setting where any kind of risk taking is suboptimal for shareholders, we show that excessive risk taking may occur for one of two reasons: risk preferences or incentives. Even when compensated through restricted company stock, experimental CEOs take large amounts of excessive risk. This contradicts classical financial theory, but can be explained through risk preferences that are not uniform over the probability and outcome spaces, and in particular, risk seeking for small probability gains and large probability losses. Compensation through options further increases risk taking as expected. We show that this effect is driven mainly by the personal asset position of the experimental CEO, thus having deleterious effects on company performance.

Construction contracts: law and management. 5th edition

The fifth edition of this best-selling textbook has been thoroughly revised to provide the most up-to-date and comprehensive coverage of the legislation, administration and management of construction contracts. It now includes comparison of working with JCT, NEC3 and FIDIC contracts, throughout. In line with new thinking in construction management research, this authoritative guide is essential reading for every construction undergraduate and is an extremely useful source of reference for practitioners.