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Agency Theory and Wheat Marketing in Australia

Author

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  • Bushell, James
  • MacAulay, T. Gordon

Abstract

The dual class shareholding company has been adopted as a way of managing the single desk operating system for wheat in Australia. Using B Class ASX listed shares to fund the operation of the company, and the use of A Class grower held shares to control the direction of the company, the objectives of the current arrangements are to maximise net pool returns to growers. Using principal-agent theory, the current marketing arrangements are examined. Considering both groups of shareholders as principals of one agent, this paper has focused on examining the contracts between the agent and each principal, and the incentives provided by these contracts to the agent to act in the interests of each of the shareholder groups. The reward to the agent from each principal is examined, and it is found that the ultimate objective of the company may not be fulfilled by the current marketing arrangements, which will incur agency costs to at least one group of shareholders. It is suggested that a reformulation of the remuneration model is required in order to reduce the risk that the objectives of both groups of shareholders are not met.

Suggested Citation

  • Bushell, James & MacAulay, T. Gordon, 2007. "Agency Theory and Wheat Marketing in Australia," 2007 Conference (51st), February 13-16, 2007, Queenstown, New Zealand 10350, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare07:10350
    DOI: 10.22004/ag.econ.10350
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    File URL: https://ageconsearch.umn.edu/record/10350/files/cp07bu01.pdf
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    Cited by:

    1. Kingwell, Ross S., 2011. "Managing complexity in modern farming," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(1), pages 1-23.

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    Keywords

    Marketing;

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