Agency Theory or Principal Agent Theory is the relationship that involved the contractual link between the shareholders (the principals) that provide capital to the company and the management (agent) who runs the company. The principals will engage the agent to carry out some services on their behalf and would normally delegate some decision-making authority to the agents. However, as the number of shareholders and the complexity of operations grew, the agent, who had the expertise and essential knowledge to operate the business and company tend to increasingly gained effective control and put them in a position where they were prone to pursue their own interests instead of shareholder’s interest.
Agency theory addresses three types of problems that could exist from the separation of ownership and management which might consequently affect firm value later. They are the effort problem, the assets’ use problem and different risk preferences problem.
The first problem is the effort problem which concerns whether or not managers apply proper effort in managing corporations so as to ...
Sachs, A. (2010). Management, Plain and Simple. Time, 175(15), Global 4. Retrieved from Academic Search Complete database.
Ineffective management is a global issue that causes billions of dollars in loss to businesses each year. A report from the Chartered Management Institute indicates that in th...
Most recent theories on motivation conclude that people will start certain behaviors under the belief that this behavior will accomplish desired goals or outcomes. With Lewin (1936) and Tolman (1932) leading the charge, the goal-oriented behavior led researchers to want to understand more on the psychological value people attribute to goals, people’s expectations on reaching these goals, and the structures which keep people striving to achieve these goals. After some recent findings on goal-oriented behavior, researchers were able to differentiate different types of goals, whereas before researchers assumed that goals that were valued the same, with the same expectations of achievement, would need the same amount
What is the relationship between management and mission, resources, the system process, and structure? Which of these internal factors are ends, and which are means?
The discussion of free will and its compatibility with determinism comes down to one’s conception of actions. Most philosophers and physicists would agree that events have specific causes, especially events in nature. The question becomes more controversial when philosophers discuss the interaction between human beings, or agents, and the world. If one holds the belief that all actions and events are caused by prior events, it would seem as though he would be accepting determinism. For if an event has a particular cause, the event which follows must be predetermined, even if this cause relates to a decision by a human being. Agent causation becomes important for many philosophers who, like me, refuse to accept the absence of free will in the universe.
An organization’s structure can affect its efficiency and productivity. The two main management theories are the Classic Theory and Theory X. Classical theory is defined as a management theory of a large organization in which management is led by intuition to motivate and control employees (Hamilton, 2008 p. 41). The Classic Theory can be divided into two large subgroups, scientific managers and bureaucratic theorists. Scientific manager’s focus is on reducing production costs while bureaucratic theorists focus is on administrative efficiency (Hamilton, 2008 p. 43). Although Theory X is not a large subgroup of the Classical Theory, it is under the classical theory and its crucial point is that workers are assumed lazy; therefore managers punish them to motivate them. Managers of Theory X believe that the average person; will avoid work because they do not like work, will not strive to achieve objectives, will avoid responsibilit...
Wren. (2005). The History of Management Thought (5th ed.). Danvers, MA: Wiley & Sons. (Original work published 1976)
Tom Peters is described as a “management guru” from his “Double Shot Interview with Tom Peters; Management Guru” on YouTube. Here he discusses says he was one of the first people who “associated excellence with business”. He goes on to further say that in a professional soccer/football team there are 53 professional players, his point being “that any organised group of human beings is attempting in some kind of fashion to be of service”, therefore, just like in a business you don’t measure excellence by just basing it on profit or losses, “in sport you don’t measure at all entirely by the score of the game, you measure significantly by the quality of the game”.
An agency relationship is formed between two parties when one party (the agent) agrees to represent another party (the principal). Normally, all employees who deal with third parties are considered agents. Principal-Agent relationships are defined as the understanding that the agent will act for and on behalf of the principal. (Cheeseman) The agent assumes an obligation of loyalty to the principal that he will follow the principal’s instructions and will neither intentionally nor negligently act improperly in the performance of the act. An agent cannot take personal advantage of the business opportunities the agency position uncovers. A principal-agent relationship is fiduciary, meaning these obligations bring forth a fiduciary relationship of trust and confidence. As such, an agency relationship is governed by employment law.
Robbins, Stephen P., David A. DeCenzo, and Mary K. Coulter. Fundamentals of Management: Essential Concepts and Applications. 7th ed. Upper Saddle River, NJ:
Over the past hundred years management has continuously been evolving. There have been a wide range of approaches in how to deal with management or better yet how to improve management functions in our ever changing environment. From as early as 1100 B.C managers have been struggling with the same issues and problems that manager’s face today. Modern managers use many of the practices, principles, and techniques developed from earlier concepts and experiences.
2. Kinicki, Angelo, Williams, Brian Management, a practical introduction, Second Edition. New York, New York, McGraw-Hill 2006/2003
Robbins, S.P., & Coulter, M. (2009). Management (10th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
There are several theories that examine an organization and it’s approach to managing work in an effort to develop efficiency and increase production. Two classical approaches to management are Taylor’s scientific management theory and Weber's bureaucratic management theory. Both men are considered pioneers of in the study of management.
5. Business is business and every firm has to find ways to produce and market its goods. Why, then, might managers be unable to successfully apply the techniques and concepts they have learned in