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Abstract

The institutional economic appraisal conducted in this paper confirms that equity schemes are subject to institutional incompleteness as proposed in ICT. The incompleteness stem from the lack of verifiability related to social capital, embeddedness, governance and micro performance. In addition, they lack the requisite ex ante incentives to enable ex post adaptation, counterveilance over opportunism, and the distribution of residual claims and control. The first reason for incompleteness emanate from the motivations of the initiators, which is opportunism by landowners to secure their assets in the face of uncertainty and/or enhance their returns in the marketplace. The lack of worker effort and options in the early stages raises credible commitment questions. Examining the governance aspects of equity schemes reveal that they are consistent with modern trends to separate ownership and control. However, a key concern is the asymmetry in human capital and subsequently in power, residual control, gratification, and ultimately economic empowerment. The analysis is aimed at identifying the incentives and innovations required to make equity schemes, as a type of shareholder contract, more complete and credible in an empowerment context. Recommendations towards institutional innovation are offered.

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