Agency Theory: Leadership and Management
The process of establishing an ethical corporation requires a moral attitude. The people engaged in the decision-making process, even if they are not responsible for the implementation of these actions, must consider moral values each time they make a policy and implement a decision. Agency theory relies on this chain of actions and responsibility. It addresses the relationship where in a contract “one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf which involves delegating some decision making authority to the agent” (Jensen and Meckling 1976, 308). Under this circumstance, the principal and the agent are constantly in competition ...
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