An Empirical Exploration of Decision-making Under Agency Controls and Stewardship Structure

abstract Two theories have emerged in the managerial control literature as to the best way for organizations to ensure that managers are acting in the firm's best interest: agency theory, which stresses controlling decision‐makers through monitoring and incentives aligned with organizational goals, and stewardship theory, which stresses that decision‐makers will act in the organization's best interest even in the absence of controls. Much of the research investigating the utility of these two positions is based on archival data where actual decision‐making can only be inferred. In this study, we utilize a laboratory methodology in order to determine if decision‐makers actually make different decisions when under the types of control (or lack thereof) suggested in these two theories. The results of this study show that individuals under agency controls invest more in alternatives that maximize profits of an organization than individuals under stewardship controls.     

Should I stay or should I go? Agency nursing work in the UK

There are competing perspectives as to whether agency represents the desire to be a ‘free agent’ in terms of greater flexibility and control, or whether it represents a reluctant retreat from permanent employment. This paper explores the reasons why nurses in the UK work on an agency basis through surveys of two nursing agencies and asks: to what extent do supply-side preferences contribute to the decision for nurses to work on an agency basis? How does working on an agency basis affect the work-life balance and career aspirations of nurses? Two surveys were conducted; one with a ‘generalist’ nurse agency; and one with a ‘specialized’ agency, in order to examine the impact of rare/specialized skills on pecuniary motives. It is found that while nurses who also have a permanent job are more likely to report pecuniary factors as influencing the decision to work through agencies, nurses who solely work agency are more likely to emphasize work-life balance issues and escaping ‘office politics’ as key factors. Importantly, the findings point to the continued appeal of agency work as a means to exit the nursing workplace, suggesting that government reforms to increase the appeal of nursing as a profession have only partially addressed the concerns of nurses.     

The effect of noise in a performance measure on work motivation: A real effort laboratory experiment

This paper reports the results of an individual real effort laboratory experiment where subjects are paid for measured performance. Measured performance equals actual performance plus noise. We compare a stable environment where the noise is small with a volatile environment where the noise is large. Subjects exert significantly more effort in the volatile environment than in the stable environment. This finding is in line with standard agency theory and contrasts the intuitive idea captured by a distinct element of expectancy theory that noisier performance measures would lower work motivation.     

Agency Problems in Diverse Contexts: A Global Perspective

abstract    Bruce, Buck and Main (2005 ) offer two criticisms of agency theory as a valid model of executive behaviour. First, they suggest that because researchers have failed to find a strong empirical link between executive pay and firm performance, and since this research generally rests on models derived from agency theory, then we must question the theory. Second, they suggest that agency theory is under-socialized and therefore lacks generalizability to settings where social solutions would seem to eliminate the agency problem. In our response we make three points. First, agency theory rests on an assumption of self-interest that does not necessarily reflect opportunism. Second, agency theory does not make any reference to pay-performance sensitivity, and the failure of this research can be attributable to a variety of problems with the research. Third, we agree that agency theory does not explicitly recognize contextual factors, but suggest that this abstraction from context, gives agency theory greater generalizability. Finally, we review the UK and German contexts discussed by Bruce, Buck and Main to show that socialized solutions do not prevent the occurrence of agency problems.     

The relationship between private investors and small firms: an agency theory approach

Many small firms in Sweden are characterized by a lack of equity capital. For several years measures to increase the equity capital have been discussed. In this discussion the private investors' market has received virtually no attention. This study presents some preliminary results of the private investors in Sweden.

The research in small firms financing is characterized by a lack of theoretical framework. One basic assumption in the study is that agency theory can provide an essential framework to explain the interaction between the private investor and entrepreneur. Twenty-five hypotheses generated from agency theory are formulated and tested on 62 small unlisted firms in Sweden. Multiple regression analysis is used for the causal analyses.

The empirical results in the study show inter alia that the geographic distance and the private investor's knowledge about the portfolio firm's transformation process seem to be the most influential factors for determining the private investor's involvement in the portfolio firms. It is also interesting to notice that none of the variables, frequency of contacts and the private investor's operational work in the portfolio firm affect the performance of the firm. Contrary to conventional wisdom, private investors do not add value to their portfolio firms through their interaction with the entrepreneurs.

The theoretical conclusion is that agency theory does not provide any satisfactory framework to explain the private investor - entrepreneur relationship. Some of the basic assumptions in agency theory seem to be invalid. A model for the relationship between private investors and entrepreneurs is developed in which four interaction strategies are identified. The model gives implications on two levels: the portfolio level and the individual case level.     

Incentives Management During Privatization: An Agency Perspective

abstract    This paper explains, through a field study and from an agency perspective, how monitoring and incentive alignment mechanisms change to support the interests of a privatized firm's new ownership. In this case, privatization led to important changes in the board of directors and to more formal performance evaluation and compensation systems for top managers, as profitability and financial control gained relevancy with the firm ownership change. Our results show that differences in incentives management before and after privatization are due to different agency relations in the two periods. We also argue that in a privatization framework the relation between monitoring and incentive alignment mechanisms is complex, not simply substitutive as agency theory would predict, and this finding allows us to refine and extend agency theory for this specific context.     

Power as a determinant of executive compensation

Most empirical investigations on the disassociation between executive compensation and firm performance have been done using agency theory. Agency theory alludes to a power imbalance favorable to the executives, allowing them to pursue their self-interests in the form of large pay packages. However, because of its roots in the economic discipline, agency theory has led researchers to test financial rather than behavioral hypotheses. Over 70 years of research has been conducted on the pay-form-performance relationship, but only a few significant relationships have been found. This paper attempts to incorporate behavioral conjectures of power into the agency theory framework to provide a comprehensive approach to testing executive pay. Agency theory is combined with the resource dependency theory and with specific measures of power developed by Finkelstein (1992) for a more complete executive pay model.     

Institutional theory and HRM: A new look

The context of HRM is important but undertheorized (Paauwe, 2009) and subsequently underresearched (Jackson, Schuler, & Jiang, 2014). We offer two recent perspectives of institutional theory—institutional logics and institutional work—as theoretical lenses through which scholars can explore the influence of institutional context on HRM and more intriguingly the influence of HRM professionals on their institutional contexts. Though others have introduced institutional theory to HRM scholarship (e.g. Paauwe & Boselie, 2003), we bring a conceptualization of institutional theory that reflects its advances over the last fifteen years, advances highly relevant to HRM scholars. While previous conceptualizations of institutional theory focus on the direct constraint of institutions on HRM, institutional logics emphasizes complexity, multilevel dynamics, and agency. Similarly, institutional work addresses agency at the day-to-day level, exploring how actors create, maintain, and disrupt the institutional contexts in which they are embedded. Directions for HRM research are discussed.     

Doing more and doing better are two different entities: Different patterns of family control and environmental performance

Family firms bear two types of agency costs, including type I and type II agency problems, in corporate environmental practices: (1) Outside executives at family firms hesitate to engage in environmental strategies, which can lead to drops in profits; (2) Controlling families employ opportunistically environmental management to achieve their interests. We argue that a primary cause for the agency problems lies on ineffective internal corporate governance at family firms, which can cause loss of managerial (or power) balance between outside executives and family executives. Our findings show that family firms with ownership and strategic control (FSC), which family executives and outside executives monitor and constrain each other, can achieve the highest environmental performance. Moreover, external controls, including product market competition and provincial environmental regulations, substitute effective internal control of FSC. The environmental performance premium of FSC is more prevalent when the production market competition is lower. Family firms with ownership, operational, and strategic control (FOSC) can achieve higher environmental performance within a province with more stringent environmental regulations.     

How to foster collaborative performance management? Key factors in the US federal agencies

ABSTRACT

Public employees are urged to be tireless collaborators and skilled performance managers, but can they be both at the same time? We describe two approaches to collaborative performance management observed in the US federal performance system: interagency collaboration to achieve cross-agency goals, and intra-agency collaboration to achieve agency goals. We find that some factors that reinforce intra-agency collaboration – accountability to agency goals, investment in the agency performance system – fail to support, or even undercut, interagency collaboration. However, other factors – seniority, participation in goal-setting, and goal salience – can encourage both types of collaborative performance management.     

Board gender diversity and corporate environmental performance: The moderating role of family and dual‐class majority ownership structures

While prior work has investigated the impact of (a) ownership structure and (b) board gender diversity separately on corporate environmental performance, researchers have not studied the potentially important relationship between ownership control and female board diversity in influencing corporate environmental performance jointly. We do so in the context of majority ownership in family‐controlled and dual‐class firms whose motives and influence are theoretically different from that of the firm's minority shareholders. Drawing on resource dependency, socioemotional wealth theory, and secondary agency theory, we hypothesize that majority family owners and dual‐class owners likely choose women directors to help advance their personal preferences for environmental corporate social responsibility. Our empirical tests utilizing 2,755 U.S. firm years over the 2010–2015 show that, as hypothesized, these two majority ownership types interact with board gender diversity to positively influence corporate environmental performance.     

Internationalization and Auditor Choice

Prior research shows that internationalization increases information asymmetry and conflicts of interest between managers and outside investors, which lead to greater agency problems. Agency theory predicts a demand for higher quality auditors when agency problems are more severe. This study investigates whether the extent of internationalization influences auditor choice and whether audit quality has performance implications for internationalization. Using a set of U.S. firms from 2003 to 2009, we find the extent of internationalization positively related to audit quality. Furthermore, higher quality audits positively moderate the relation between internationalization and firm performance. Taken together, these results suggest that higher quality audit mitigates the agency problem associated with internationalization.     

The market for corporate control in professional football: is there an agency problem?

This paper identifies the nature of agency problems in professional football in the UK. Conflicting elements within director-owners'objective functions combined with highly concentrated ownership rights are sources of agency problems, manifest by the poor financial performance of many clubs. Arguably, a club's supporters influence its output implying that supporters may be considered as an input.
Given this, theory suggests that efficiency may be enhanced if supporters possess more property rights in their respective clubs.     

Pursuing sustainable development through green entrepreneurship: An institutional perspective

Pursuing sustainable development through green entrepreneurship has been advocated, conceptualized, and empirically examined in the recent environmental management and entrepreneurship literature. However, green entrepreneurs are embedded in institutional environments that may discourage them from embracing sustainable development because of the “paradox of embedded agency.” How can a firm overcome the liability of such an agency issue and escape what has become known as a “green prison”? This study proposes that, because international venturing exposes firms to foreign institutions, it provides them with opportunities for institutional learning. Thus, we examine how international venturing influences green entrepreneurship which, in turn, impacts firm performance. Specifically, based on institutional theory, this study develops a firm-level green entrepreneurship framework with three dimensions: green initiatives (a firm's active adoption of green practices), received government green support (benefits that a firm gains from the government by adapting to governmental incentives, programs, and policies related to green practices), and green political influence (a firm's attempts to influence legislation that enacts laws, rules, and regulations related to green practices). The results obtained by analyzing 152 firms that engage in international venturing activities and 151 firms that do not show that international venturing is positively associated with green initiatives and government green support while these two factors further directly enhance firm performance and mediate the effects of international venturing on performance.     

Playing God? the Performance of Appraisal

The authors argue here that work on performance appraisal suffers form a narrow theoretical perspective and a variety of methodological limitations. the narrow theoretical base appears as a consequence of the treatment of performance appraisal within a largely neo-human relations perspective. More recently, however, a critical debate on appraisal has emerged. In order to further this debate, we analyse performance appraisal from the contrasting perspectives of labour process theory and the writings of Michel Foucault. This analysis points to a number of limitations of both mainstream work on appraisal and more recent critical studies. From this, we argue that though appraisal can be seen as a means of manufacturing consent among employees, it should not necessarily be seen as a zero-sum game solely benefiting management groups. At the same time, however, appraisal must be viewed within the wider context of other forms of performance management, surveillance and accountability. Finally, we note that while labour process and Foucauldian perspectives help to contextualise and critique work on appraisal, both are limited by a lack of attention to human agency.     

Effects of agency risks and procedural justice on board processes in venture capital-backed firms

This paper builds a model of the effects of agency risk and procedural justice in the boards of directors of venture capital-backed firms. Such boards are unique in that they consist of managers and outside owners with significant power and incentive to be highly involved in venture governance. The authors integrate agency theory and procedural justice perspectives to develop propositions regarding the effects of agency risk and board processes on the responses to poor performance and conflicts of interest. This integrated perspective suggests that factors that increase perceived agency risks will increase outsiders' tendency to focus efforts on monitoring and controlling board decisions and their propensity to resort to formal means to resolve conflicts. However, the authors suggest that through their effects on trust and positive attributions, fair procedures and interactions will reduce these tendencies. A discussion of the practical and theoretical implications of the proposed model concludes the paper.     

Goals,Strategic Planning,and Performance in Government Agencies

Abstract

The setting of clear goals and strategic planning are characterized as critical roles of public managers that are closely related to the measurement and enhancement of organizational performance. This study investigates the effects of goal properties and strategic planning capacity and their interacting effects on government agency performance, an aspect which has rarely been explored in the public administration field. For this analysis, we use the hierarchical linear modelling method with data from the 2005 Merit Principle Survey and the 2005 Program Assessment Rating Tool. The dependent variable is perceived organizational performance at the individual level. The main independent variables are three types of goal properties – job-goal commitment, job-goal specificity, and mission specificity, measured at the individual level – and strategic planning capacity, measured at the agency level. The results suggest that in the data these goal-related attitudes and activities can make crucial contributions to the enhancement of organizational performance with no interacting effect.     

When do Non‐Family CEOs Outperform in Family Firms? Agency and Behavioural Agency Perspectives

Family firms represent a globally dominant form of organization, yet they confront a steep challenge of finding and managing competent leaders. Sometimes, these leaders cannot be found within the owning family. To date we know little about the governance contexts under which non‐family leaders thrive or founder. Guided by concepts from agency theory and behavioural agency theory, we examine the conditions of ownership and leadership that promote superior performance among non‐family CEOs of family firms. Our analysis of 893 Italian family firms demonstrates that these leaders outperform when they are monitored by multiple major family owners as opposed to a single owner; they also outperform when they are not required to share power with co‐CEOs who are family members, and who may be motivated by parochial family socioemotional priorities.     

Ways to promote valuable innovation: intellectual capital assessment for higher education system

The importance of intellectual capital (IC) has been emphasized during recent year. Such a trend puts higher education systems under great pressure for two main reasons: first, IC has been shown to be a key driver of innovation; second, the higher education system assumes the unique function of fostering innovation. Knowing how best to improve IC is considered the most significant factor of success in enhancing innovation. However, the higher education system of today has difficulty in measuring IC precisely to improve its innovation performance. This study is to conquer such a problem by establishing critical criteria for IC assessment. Based on the findings, the higher education system is encouraged to successfully evaluate its IC performance and then find ways to improve this performance to achieve better innovation.     

Temporary Liaisons: The Commitment of ‘Temps’ Towards Their Agencies*

abstract The majority of research on organizational commitment has focused on commitment in traditional, ongoing and open‐ended relationships. The commitment of employees in non‐standard work arrangements such as temporary employment has been subject to much less theoretical and empirical investigation. In this study, we examine the affective and continuance commitment of temporary workers towards their agency and its determinants. We distinguish two groups of determinants: the process by which the temporary worker chose a particular agency and the support provided by the agency. The findings can be summarized as follows: (1) affective commitment among temps is generally higher than their continuance commitment; (2) having more alternative agencies to choose from (i.e., volition) does not enhance the commitment of temporary workers; (3) a public choice for a particular agency raises both types of commitment, whereas the perceived agency dependence created by the choice increases continuance, but not affective commitment; and (4) both types of commitment are positively influenced by agency supportiveness, reflected in the way the agency deals with problems, the career support it provides, and the way it keeps in close contact with its temporary workers. Finally, the results suggest that factors raising affective commitment may ‘spill over’ to increase continuance commitment.