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2019 | Buch

Agency Theory and Executive Pay

The Remuneration Committee's Dilemma

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This new book examines the relationship between agency theory and executive pay. It argues that while Jensen and Meckling (1976) were right in their analysis of the agency problem in public corporations they were wrong about the proposed solutions. Drawing on ideas from economics, psychology, sociology and the philosophy of science, the author explains how standard agency theory has contributed to the problem of executive pay rather than solved it. The book explores why companies should be regarded as real entities not legal fictions, how executive pay in public corporations can be conceptualised as a collective action problem and how behavioral science can help in the design of optimal incentive arrangements. An insightful and revolutionary read for those researching corporate governance, HRM and organisation theory, this useful book offers potential solutions to some of the problems with executive pay and the standard model of agency.

Inhaltsverzeichnis

Frontmatter
Chapter 1. Agency Costs, Coordination Problems, and the Remuneration Committee’s Dilemma
Abstract
This chapter provides a context for the rest of the book, explaining what is meant by the problem of executive pay, how agency theory has contributed to the problem rather than solved it, and how the critique of agency theory set out in the following chapters might help to solve the problem.
Alexander Pepper
Chapter 2. What’s Wrong With Agency Theory?
Abstract
This chapter begins by describing the standard model of the firm in organisational economics. It continues by providing a critique of the main premises on which the standard model is based: that shareholders own firms and directors are their agents; that agency costs arise at the level of the firm because of the different interests of shareholders and managers; that man is rational, self-interested, and rent-seeking and there is no non-pecuniary agent motivation. A case study of AstraZeneca is used to illustrate some of the points.
Alexander Pepper
Chapter 3. What a Public Corporation Really Is
Abstract
This chapter addresses one of the assumptions of standard agency theory—that the corporation is a legal fiction. It sets out a series of arguments as to why this assumption is incorrect, explains why public corporations should be regarded in ontological terms as real entities, and spells out why this matters—the consequences for agency theory as a whole and the particular consequences for shareholders and directors.
Alexander Pepper
Chapter 4. Executive Pay as a Collective Action Problem
Abstract
This chapter takes as its starting point Mancur Olson’s assertion in The Logic of Collective Action that his theory of group size and group behaviour has implications for the governance of companies. It explains why shareholders of public corporations are unlikely to solve executive pay problems because of a collective action problem, and how ideas about the governance of common pool resources have implications for the design of corporate governance mechanisms. A study of the FTSE 100 is used to illustrate the points raised.
Alexander Pepper
Chapter 5. Behavioural Agency Theory
Abstract
This chapter explains that the conventional design of executive compensation plans, involving high salaries, generous bonuses, and highly leveraged stock programmes is based on an outdated set of assumptions about human behaviour and executive agency. It describes a revised theory of agency and a modified design framework for executive pay plans based on developments in behavioural science.
Alexander Pepper
Chapter 6. The Modern Corporation’s Final Chapter
Abstract
The final section concludes by drawing together the various ideas about corporate governance and incentives that have been identified earlier in the book, and shows how these ideas are consistent with proposals for a possible future for the public corporation set out in the last chapter of The Modern Corporation and Private Property, by Berle and Means, published in 1932.
Alexander Pepper
Backmatter
Metadaten
Titel
Agency Theory and Executive Pay
verfasst von
Prof. Alexander Pepper
Copyright-Jahr
2019
Electronic ISBN
978-3-319-99969-2
Print ISBN
978-3-319-99968-5
DOI
https://doi.org/10.1007/978-3-319-99969-2