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The Agency Relationship in Churches: An Empirical Analysis

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  • Charles Zech

Abstract

. The agency relationship has been observed in a variety of settings. Churches, like other organizations, are plagued with the typical agency problems of moral hazard, observability, goal displacement, and risk aversion. How do churches cope with these issues in dealing with their most critical resource, clergy? This study analyzes the agency relationship between churches and their clergy. Using data from nine denominations, this study finds strong evidence that pastor compensation is not tied directly to performance, but rather indirectly through promotion tournaments. Successful pastors are rewarded by being called to larger, presumably wealthier and more prestigious, congregations. Since it is so difficult to observe and measure a pastor's performance in specific activities, churches differentiate good pastors from mediocre ones by considering their total performance, rather than any specific activities.

Suggested Citation

  • Charles Zech, 2007. "The Agency Relationship in Churches: An Empirical Analysis," American Journal of Economics and Sociology, Wiley Blackwell, vol. 66(4), pages 727-746, October.
    • Handle: RePEc:bla:ajecsc:v:66:y:2007:i:4:p:727-746
    DOI: 10.1111/j.1536-7150.2007.00537.x
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    References listed on IDEAS

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    1. Jay C. Hartzell & Christopher A. Parsons & David L. Yermack, 2010. "Is a Higher Calling Enough? Incentive Compensation in the Church," Journal of Labor Economics, University of Chicago Press, vol. 28(3), pages 509-539, July.

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