Samenvatting artikelen
Eisenhardt – Agency Theory
Agency theory is that you have an agent and an principle. You can have two problems: a goal conflict
when it is difficult or expensive for the principal to verify what the agent is actually doing. A second
problem is that why have different attitudes towards risk. We set an contract between the agent and
principal. An behaviour oriented contract is more efficient than an outcome-oriënted contract. There
are two lines in this theory:
Positivist Agency Theory: The positivist stream has been most concerned with describing the
governance mechanisms that solve the agency problem (Jensen). Mostly between manager and
owner. Het is minder wiskundig.
Proposition 1: When the contract between the principal and agent is outcome based, the agent is
more likely to behave in the interests of the principal.
Proposition 2: When the principal has information to verify agent behaviour, the agent is more likely
to behave in the interests of the principal
Principal-agent Theory: The focus of the principal-agent literature is on determining the optimal
contract, behaviour versus outcome, between the principal and the agent. Mostly between
employee and employer. When the principle knows the behaviour of the agent an behaviour-
oriented contract is most efficient. When the principle doesn’t an outcome-oriented is most efficient
-> moral hazard + adverse selection.
Propositions
Positively related to behaviour-based Positively related to outcome-based contracts
contracts
Information systems Risk aversion of principal
Outcome uncertainty Goal conflicts
Risk aversion Outcome measurability
Task programmability
Length of agency relationship
The major differences between agency theory and the organizational control literature are the risk
implications of principal and agent risk aversion and outcome uncertainty. In the agency theory
there are the following characteristics.
From an agency perspective, boards can be used as monitoring devices for shareholder interests.
When boards provide richer information, compensation is less likely to be based on firm
performance.
, Jensen: argues that agency theory is powerful and Perrow says it is dangerous and has a lack of
testable implications. The ‘truth’ lies in the middle: the theory provides a unique realistic and
empirically testable perspective on problems of cooperative effort. The overall conclusion is that
agency theory is a useful addition to organizational theory. The agency theory ideas on risk, outcome
uncertainty, incentives, and information systems are novel contributions to organizational thinking,
and the empirical evidence is supportive of the theory, particularly when coupled with
complementary theoretical perspectives.
Misangyi – CORPORATE GOVERNANCE MECHANISMS
Our findings suggest that high profits result when CEO incentive alignment and monitoring
mechanisms work together as complements rather than as substitutes (in complements they are
more effective and they lessening the agency problem). Furthermore, they show that high profits are
obtained when both internal and external monitoring mechanisms are present.
Monitoring = by the board of directors, externe blokkeringen in systeem.
Alignment = afstemmen van beloning met prestaties en aandelenbezit van bestuurders -> prikkels
voor goed werk leveren (incentives).
Internal mechanisms: alignment for CEO + shareholder, director independence, CEO duality (CEO is
boss and the chairman of the board of directors. Under this condition, the CEO is able to leverage
significant executive power to make critical business decisions in a more timely manner), aligning
(afstemmen) the interests of top managers.
External mechanisms: monitoring.
A CEO non-duality does not guarantee success.
Forbes – Boards of directors as strategic decision-
making groups
Recent research developments underscore the need for research on the processes that link board
demography with firm performance. In this article we develop a model of board processes by
integrating the literature on boards of directors with the literature on group dynamics and
workgroup effectiveness.
Parsimony says: as long as research can explain what the group- or organization-level impact of
demography is, it is not necessary to determine why demography operates in the observed way. This
is no longer convincing because findings show that researchers need to incorporate the study of
process variables so that they can expand their understanding of the factors that contribute to group
performance and address questions concerning the influence of group demography with adequate
care. While these lessons are applicable to many areas of group demography, they are particularly
applicable to boards.
There are three board processes that we propose will significantly influence a board's task
performance and cohesiveness (optimal functioning is a moderate for cohesiveness):
effort norms
cognitive conflict: "disagreements about the content of the tasks being performed, including
differences in viewpoints, ideas and opinions"
Eisenhardt – Agency Theory
Agency theory is that you have an agent and an principle. You can have two problems: a goal conflict
when it is difficult or expensive for the principal to verify what the agent is actually doing. A second
problem is that why have different attitudes towards risk. We set an contract between the agent and
principal. An behaviour oriented contract is more efficient than an outcome-oriënted contract. There
are two lines in this theory:
Positivist Agency Theory: The positivist stream has been most concerned with describing the
governance mechanisms that solve the agency problem (Jensen). Mostly between manager and
owner. Het is minder wiskundig.
Proposition 1: When the contract between the principal and agent is outcome based, the agent is
more likely to behave in the interests of the principal.
Proposition 2: When the principal has information to verify agent behaviour, the agent is more likely
to behave in the interests of the principal
Principal-agent Theory: The focus of the principal-agent literature is on determining the optimal
contract, behaviour versus outcome, between the principal and the agent. Mostly between
employee and employer. When the principle knows the behaviour of the agent an behaviour-
oriented contract is most efficient. When the principle doesn’t an outcome-oriented is most efficient
-> moral hazard + adverse selection.
Propositions
Positively related to behaviour-based Positively related to outcome-based contracts
contracts
Information systems Risk aversion of principal
Outcome uncertainty Goal conflicts
Risk aversion Outcome measurability
Task programmability
Length of agency relationship
The major differences between agency theory and the organizational control literature are the risk
implications of principal and agent risk aversion and outcome uncertainty. In the agency theory
there are the following characteristics.
From an agency perspective, boards can be used as monitoring devices for shareholder interests.
When boards provide richer information, compensation is less likely to be based on firm
performance.
, Jensen: argues that agency theory is powerful and Perrow says it is dangerous and has a lack of
testable implications. The ‘truth’ lies in the middle: the theory provides a unique realistic and
empirically testable perspective on problems of cooperative effort. The overall conclusion is that
agency theory is a useful addition to organizational theory. The agency theory ideas on risk, outcome
uncertainty, incentives, and information systems are novel contributions to organizational thinking,
and the empirical evidence is supportive of the theory, particularly when coupled with
complementary theoretical perspectives.
Misangyi – CORPORATE GOVERNANCE MECHANISMS
Our findings suggest that high profits result when CEO incentive alignment and monitoring
mechanisms work together as complements rather than as substitutes (in complements they are
more effective and they lessening the agency problem). Furthermore, they show that high profits are
obtained when both internal and external monitoring mechanisms are present.
Monitoring = by the board of directors, externe blokkeringen in systeem.
Alignment = afstemmen van beloning met prestaties en aandelenbezit van bestuurders -> prikkels
voor goed werk leveren (incentives).
Internal mechanisms: alignment for CEO + shareholder, director independence, CEO duality (CEO is
boss and the chairman of the board of directors. Under this condition, the CEO is able to leverage
significant executive power to make critical business decisions in a more timely manner), aligning
(afstemmen) the interests of top managers.
External mechanisms: monitoring.
A CEO non-duality does not guarantee success.
Forbes – Boards of directors as strategic decision-
making groups
Recent research developments underscore the need for research on the processes that link board
demography with firm performance. In this article we develop a model of board processes by
integrating the literature on boards of directors with the literature on group dynamics and
workgroup effectiveness.
Parsimony says: as long as research can explain what the group- or organization-level impact of
demography is, it is not necessary to determine why demography operates in the observed way. This
is no longer convincing because findings show that researchers need to incorporate the study of
process variables so that they can expand their understanding of the factors that contribute to group
performance and address questions concerning the influence of group demography with adequate
care. While these lessons are applicable to many areas of group demography, they are particularly
applicable to boards.
There are three board processes that we propose will significantly influence a board's task
performance and cohesiveness (optimal functioning is a moderate for cohesiveness):
effort norms
cognitive conflict: "disagreements about the content of the tasks being performed, including
differences in viewpoints, ideas and opinions"
