Agency Theory

  • Needle D
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Abstract

Abstract An agency relationship exists when an agent performs a task on behalf of someone else. Agency theory is based on the assumptions that the agent will act in a self-interested way and this needs to be controlled. The theory applies to different types of relationships in organizations, for example, between shareholders and managers, management and labor, and in subcontracting. There are strong links between agency theory and those theories related to ownership and control, transaction analysis, and motivation. Agency theory was used to explain management behavior in the 2008 banking crisis. Critics cite the lack of real evidence and question the assumptions of selfish behavior. However, the theory gives some insights as to how organizations operate and to the operation of reward systems and performance management.

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APA

Needle, D. (2015). Agency Theory. In Wiley Encyclopedia of Management (pp. 1–2). Wiley. https://doi.org/10.1002/9781118785317.weom050002

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