AGENCY

AGENCY THEORY
THEORY
“...addressed problems of how to control managers (agents) to ensure that they
act in the best interests of owners (principals).” (Hatch & Cunliffe, 2013).
Behavioral Control
Strategies

measure performance
and focus on how work
is performed rather
than the outcome of the measure the countable
task. output of the given task
such as number of
products or services
sold or carried out.

Output
(Hatch & Cunliffe, 2013) Control Strategies
First Control Strategy
suggests creating an easy repetitive task so that
changes in performance can be easily observed.
Compensation will then be based on the observed
performance of the agents (Hatch & Cunliffe, 2013).

Second Control Strategy

suggests giving a more complicated task, with the incorporation
of information systems like auditing, budgeting systems, and
additional layers of management, to gather information more
efficiently and again, base compensation on the result of the
observation(Hatch & Cunliffe, 2013).
 Third Control Strategy

Performance evaluation will be simpler, but the

compensation will be based on the overall success or
performance of the organization.
(Hatch & Cunliffe, 2013)
 Applying agency theory to nonprofit governance:
theoretical and empirical contributions
Van Puyvelde, S. (2013)

donors, consumers, clients, and members, as Workers and volunteers as agents

principals of the organization of the organization
 The proponent suggested that principals should
be clear about the goals of the organization, as
well as the incentive system, to attract agents who
are more willing to work for the nonprofit
organization, and finally achieve its mission.
personal critique on the theory

the theory has a tendency to unfairly blame

the agents, without acknowledging the
circumstances that are out of their control.
personal critique on the theory
AGENCY THEORY a presentation by Sean Aguilar

REFERENCES
Berle, A. & Means, G. (1932) The Modern Corporation and Private Property. Commerce
Clearing House, New York.
Hatch, M.J. and Cunliffe, A.L. (2013) Organization Theory: Modern, Symbolic, and Postmodern
Perspectives. 3rd Edition, Oxford University Press, New York.
Panda, B. & Leepsa, NM (2017) Agency theory: Review of Theory and Evidence on Problems and
Perspectives. Indian Journal of Corporate Governance.
Van Puyvelde, S. (2013). Applying agency theory to nonprofit governance: theoretical and
empirical contributions.