Agency Theory is the supposition that explains the relationship between principals and agents in business. The theory dates back to the early 1960s and 1970s when economist began exploring risk sharing among individuals (Eisenhardt p 58). The theory is commonly discussed in the context of the Principal/Agent Model. A key concept behind the Principal/Agent Model is that people need to delegate some of their work to others. Agency theory suggests that there is a conflict between the two parties, the principal and the agent, due to a misalignment of goals as well as different aversions to levels of risk. Agency Theory breaks down the problems that occur due to differences between goals and or desires between the principal and the agent. These …show more content…
The article also discussed the two positions on agency theory one that argued that agency theory is revolutionary and a strong foundation, while the other position argued that the theory doesn’t address a clear problem. The key idea of agency theory is that principal and agent relationships should reflect efficient organization of information and risk bearing cost. Agency theory analysis is conducted by the contract between the principal and the agent. The principal is the individual who typically the person who delegates the task and the agent is the individual who is given the task by the principal. Agency theory assumes that the humans involved in the contract have a self-interest, bounded rationality and different levels of risk aversion. The theory also assumes that there is a goal conflict among participants in agency theory, where the principal and the agent aren’t on the same page which effects efficiency and effectiveness. The article also highlights five recommendations for using agency theory in organizational …show more content…
The article summarizes and gives an overview of servant leadership, a synopsis of motivating language theory, a model and proposition, and implications and future directions for research and practice. Robert K. Greenleaf stated “The Servant-Leader is servant first. It begins with the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead. The best test, and difficult to administer is this: Do those served grow as persons? Do they while being served, become healthier, wiser, freer, more autonomous, and more likely themselves to become servants? And, what is the effect of the least privileged in society? Will they benefit, or at least not further be harmed.” Greenleaf (1977, p.13). There isn’t a specific or precise definition of servant leadership. However, based off what Greenleaf stated, one can assume that servant leadership is about serving and being a good leader not just delegating task and having a sense of power over someone else. In my opinion a servant leader should be inspiring and motivate their employees to want to do work even if no direct incentive is involved. Employees should feel that when things are tough or work is challenging that their leadership would be willing to do whatever to make them and the team
“Agency relationships are formed by the mutual consent of a principal and an agent.” (Cheeseman, p.487) Our book goes on to cite the Restatement (Second) of Agency,
Evan, William M. and Edward R. Freeman. “A Stakeholder Theory of The Modern Corporation: Kantian Capitalism.” Advanced College Essay: Business and Its Publics. Ed. Pat C. Hoy II and Denice Martone. New York: McGraw-Hill, 2002. 329-38.
Servant leadership is a perplexing theory. It takes on radical ideas like a lifetime employment policy, or employee-wide furlough, to illustrate how putting the leader at the service of their employees can result in efficient leadership. “When individuals engage in servant leadership, it is likely to improve outcomes at the individual, organizational, and societal levels (PSU, 2014)". The servant leadership actions of Charlie Kim and Bob Chapman depict how the proper use of servant leadership creates trust, and inspires productivity; benefiting their organization, their employees, and
The need to serve combined with a motivation to lead is the base of servant leader. Self determination has been positioned as an essential condition to be able to act as a servant leader (Dierendonck, 2009). It is expected that the power comes with a leadership position is used to provide others with the opportunity to become self-determined. servant leadership is also based on culture, countries with strong human orientation tend to have more servant leaders. As it is common for citizens to serve.
The delegator is accountable for the acts of delegation and incur liability if found negligent in the process of delegating and supervising; while the delegate is accountable for the completion of the delegated task. The delegator is accountable for the transfer of responsibility and authority to a competent delegate (Porter-O-Grady & Malloch, 2016). The distinct concepts of accountability and responsibility are the key elements in the effectiveness of the delegation process. The difference of “accountability and responsibility relates to their orientation” (Porter-O’Grady & Malloch, 2016, p. 53). Responsibility emphases on the work, the competence of the delegator and delegate, the efficiency of the processes, the quality of work, and the excellence of the application; while, accountability focuses on the issues of outcome and demands attention to the effects of the work (Porter-O’Grady & Malloch,
Servant Leadership, found in Chapter Ten of the text Leadership: Theory and Practice, is a paradoxical approach to leadership. It begins with the innate desire to serve first, and then lead through servant hood. Servant Leadership, originating in the early 1970s, is similar to the skills and styles approach, focusing on leadership from the leader’s viewpoint and his behavior under the leadership. Under this style of leadership, the leaders are considerate of the followers needs, empathizing with and having compassion for the followers. A servant leader feels a social responsibility to the less privileged and is concerned with inequality among the followers. Through servant leadership, a servant leader will attempt to correct these social injustices and by enabling and empowering the followers while helping the followers in developing valuable personal skills. Servant leaders are ethical, projecting strong moral behavior towards the followers, taking leadership paths that serve the greater good of an organization, the community and even society as a whole.
This paper will have a detailed discussion on the shareholder theory of Milton Friedman and the stakeholder theory of Edward Freeman. Friedman argued that “neo-classical economic theory suggests that the purpose of the organisations is to make profits in their accountability to themselves and their shareholders and that only by doing so can business contribute to wealth for itself and society at large”. On the other hand, the theory of stakeholder suggests that the managers of an organisation do not only have the duty towards the firm’s shareholders; rather towards the individuals and constituencies who contribute to the company’s wealth, capacity and activities. These individuals or constituencies can be the shareholders, employees, customers, local community and the suppliers (Freeman 1984 pp. 409–421).
(2013) analysis on servant leadership delivered practical perceptiveness on why servant leadership is an effectual leadership behavior. The authors’ study revealed servant leadership stimulated positive followers’ behaviors and reduce employment turnover. Servant leadership is a vital component to a work atmosphere that encourages the benefit of servicing others, in which followers want to remain at their place of employment. Associates’ outcomes are vital to any corporation that attempts to decrease turnover expenditure and enrich employee performance, teamwork, and customer service (Hunter et al.,
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.
One of the aspects of bureaucracy is that it creates fixed division of labor. The benefit of fixed division of labor is that it allows humans to become specialized at what they do as they can learn from their experiences and gain more in depth knowledge on the topic. When individuals work with similar environmental uncertainties on a constant basis they obtain a better understanding of how to deal with those uncertainties. They often use their experiences to deal with the situation in ways that worked for them previously. In addition when there are assigned jobs, it is easier to hold specific individuals accountable for their tasks. This allows the organization to quickly find who caused a certain problem and fix it. Accountability leads to people being more likely to work in the best interest of the organization, as they know that there could be repercussions for not doing so. People will use the techniques that they have previous experience with and that they know work in order to not make a mistake and be held accountable. And so they will work in a stable and predictable manner. When the people in the organization work in a stable and predictable manner the organization is likely to work in the same way. Accountability also helps in solving problems and quickly getting the ...
Evan, W. M., & Freeman, R. E. (1988). A stakeholder theory of the modern corporation: Kantian
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.
The fundamental role in management is attaining predetermined objectives through cooperation of staff and other parties. Organizations therefore attain their goals by utilizing the competence of their employees and this mostly applies to the executive members who are mandated with the responsibility of overseeing the development of the company’s priorities. However, there are instances when the employees at any level in the organization may experience problems due to distortions, which may cause errors and in the process compromise the goals and priorities of an organization.
Erik Erikson composed a theory of psychological development that was composed of eight stages. Erikson’s theory focuses on how personalities evolve throughout life as a result of the interaction between biologically based maturation and the demands of society. According to Erikson, “Each stage of human development presents its characteristic crises. Coping well with each crisis makes an individual better prepared to cope with the next.” (Zastrow & Kirst-Ashman, 2013, p. 314) According to Erikson’s eight stages of development, I have only been through six of the eight stages.
Applying elements of the traditional agency theory put forward by Horn, the POAS will be described and evaluated in this essay. It is concluded that the implementation of the POAS is ineffective in bringing a more accountable government for Hong Kong, as evidenced by….