AGENCY 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 measure the
than the outcome of countable output of
the task. 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, Workers and volunteers as agents

as 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.