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An Empirical Exploration of Decision-making Under Agency Controls and Stewardship Structure

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  • Henry L. Tosi
  • Amy L. Brownlee
  • Paula Silva
  • Jeffrey P. Katz

Abstract

Two theories have emerged in the managerial control literature as to the best way for organizations to ensure that managers are acting in the firm's best interest: agency theory, which stresses controlling decision-makers through monitoring and incentives aligned with organizational goals, and stewardship theory, which stresses that decision-makers will act in the organization's best interest even in the absence of controls. Much of the research investigating the utility of these two positions is based on archival data where actual decision-making can only be inferred. In this study, we utilize a laboratory methodology in order to determine if decision-makers actually make different decisions when under the types of control (or lack thereof) suggested in these two theories. The results of this study show that individuals under agency controls invest more in alternatives that maximize profits of an organization than individuals under stewardship controls. Copyright 2003 Blackwell Publishing Ltd..

Suggested Citation

  • Henry L. Tosi & Amy L. Brownlee & Paula Silva & Jeffrey P. Katz, 2003. "An Empirical Exploration of Decision-making Under Agency Controls and Stewardship Structure," Journal of Management Studies, Wiley Blackwell, vol. 40(8), pages 2053-2071, December.
  • Handle: RePEc:bla:jomstd:v:40:y:2003:i:8:p:2053-2071
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    1. repec:dug:journl:y:2017:i:2:p:179-194 is not listed on IDEAS
    2. Pursey P. M. A. R. Heugens & J. A. (Jordan) Otten, 2007. "Beyond the Dichotomous Worlds Hypothesis: towards a plurality of corporate governance logics," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1288-1300, November.
    3. Astrachan, Joseph H., 2010. "Strategy in family business: Toward a multidimensional research agenda," Journal of Family Business Strategy, Elsevier, vol. 1(1), pages 6-14, March.
    4. Pieper, Torsten M., 2010. "Non solus: Toward a psychology of family business," Journal of Family Business Strategy, Elsevier, vol. 1(1), pages 26-39, March.
    5. Yan, Yanni & Chong, Chan Yan & Mak, Simon, 2010. "An exploration of managerial discretion and its impact on firm performance: Task autonomy, contractual control, and compensation," International Business Review, Elsevier, vol. 19(6), pages 521-530, December.
    6. Chrisman, James J. & Chua, Jess H. & Kellermanns, Franz W. & Chang, Erick P.C., 2007. "Are family managers agents or stewards? An exploratory study in privately held family firms," Journal of Business Research, Elsevier, vol. 60(10), pages 1030-1038, October.
    7. Majdi Anwar Quttainah, 2011. "Do Islamic Banks Employ Less Earnings Management?," Working Papers 645, Economic Research Forum, revised 10 Jan 2011.
    8. Sebastian Goebel & Barbara E. Wei├čenberger, 2017. "Effects of management control mechanisms: towards a more comprehensive analysis," Journal of Business Economics, Springer, vol. 87(2), pages 185-219, February.
    9. Patrick Velte, 2010. "Stewardship-Theorie," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 20(3), pages 285-293, April.

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