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Agency Theory

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Encyclopedia of Sustainable Management

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Abstract

Agency theory is a concept which perceives the company as a nexus of contracts between various actors who cooperate in order to maximize firm profit. Since these actors have different goals and preference, maximizing their own utilities is likely to results in conflicts. The conflicts are mostly identified between shareholders and managers as well as between stakeholders and managers. Conflicts lead to costs and may lower the company performance understood both as financial performance and, mostly in recent years, ESG performance. To mitigate risks of these conflict and to prevent from emerging costs, agency theory offers a number of solutions related to monitoring the executive behavior as well as building incentives to shape their decisions.

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Author information

Authors and Affiliations

  1. Department of Management Theory, Warsaw School of Economics, Warsaw, Poland

    Maria Aluchna

Authors
  1. Maria Aluchna
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Correspondence to Maria Aluchna .

Editor information

Editors and Affiliations

  1. Guildhall Faculty of Business and Law London Metropolitan University, London Metropolitan University, London, UK

    Samuel O. Idowu

  2. BFH - Bern, Bern, Switzerland

    René Schmidpeter

  3. College of Business, Loyola University New Orleans, New Orleans, LA, USA

    Nicholas Capaldi

  4. International Training Centre of the IL, International Labor Organization, Turin, Italy

    Liangrong Zu

  5. Department of Economics, Society and Politics, University of Urbino Carlo Bo, Urbino, Italy

    Mara Del Baldo

  6. Instituto Politécnico da Guarda, Guarda, Portugal

    Rute Abreu

Section Editor information

  1. Ethics, Gender and Sustainability Research Group, Economics and Business Department, University of Almería, Almería, Spain

    Pedro Antonio Martín-Cervantes

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Aluchna, M. (2023). Agency Theory. In: Idowu, S.O., Schmidpeter, R., Capaldi, N., Zu, L., Del Baldo, M., Abreu, R. (eds) Encyclopedia of Sustainable Management. Springer, Cham. https://doi.org/10.1007/978-3-031-25984-5_814

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