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Agency Problems in Diverse Contexts: A Global Perspective

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  • Luis Gomez-Mejia
  • Robert M. Wiseman
  • Bernadine Johnson Dykes
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    Abstract

    Bruce, Buck and Main (2005) offer two criticisms of agency theory as a valid model of executive behaviour. First, they suggest that because researchers have failed to find a strong empirical link between executive pay and firm performance, and since this research generally rests on models derived from agency theory, then we must question the theory. Second, they suggest that agency theory is under-socialized and therefore lacks generalizability to settings where social solutions would seem to eliminate the agency problem. In our response we make three points. First, agency theory rests on an assumption of self-interest that does not necessarily reflect opportunism. Second, agency theory does not make any reference to pay-performance sensitivity, and the failure of this research can be attributable to a variety of problems with the research. Third, we agree that agency theory does not explicitly recognize contextual factors, but suggest that this abstraction from context, gives agency theory greater generalizability. Finally, we review the UK and German contexts discussed by Bruce, Buck and Main to show that socialized solutions do not prevent the occurrence of agency problems. Copyright Blackwell Publishing Ltd 2005.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Management Studies.

    Volume (Year): 42 (2005)
    Issue (Month): 7 (November)
    Pages: 1507-1517

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    Handle: RePEc:bla:jomstd:v:42:y:2005:i:7:p:1507-1517

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    Cited by:
    1. Elisaveta Sard┼żoska & Thomas Tang, 2009. "Testing a Model of Behavioral Intentions in the Republic of Macedonia: Differences Between the Private and the Public Sectors," Journal of Business Ethics, Springer, vol. 87(4), pages 495-517, July.
    2. Otten, J.A., 2008. "Theories on executive pay. A literature overview and critical assessment," MPRA Paper 6969, University Library of Munich, Germany.
    3. Sunny Sun & Xia Zhao & Haibin Yang, 2010. "Executive compensation in Asia: A critical review and outlook," Asia Pacific Journal of Management, Springer, vol. 27(4), pages 775-802, December.
    4. Otten, J.A. & Heugens, P.P.M.A.R., 2007. "Extending the Managerial Power Theory of Executive Pay: A Cross National Test," ERIM Report Series Research in Management ERS-2007-090-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    5. Chizema, Amon & Buck, Trevor, 2006. "Neo-institutional theory and institutional change: Towards empirical tests on the "Americanization" of German executive pay," International Business Review, Elsevier, vol. 15(5), pages 488-504, October.

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