Towards a Social Theory of Agency

Robert M. Wiseman, Gloria Cuevas-Rodríguez, Luis R. Gomez-Mejia

Journal of Management Studies · 2012 · Volume 49 · Issue 1

DOI: 10.1111/j.1467-6486.2011.01016.x

Abstract

We challenge critics of agency theory who suggest that agency theory's value does not extend outside a narrow context dominated by egocentric agents seeking only to maximize wealth at the expense of the principal. Instead, we argue that agency theory's flexibility allows for its application to a variety of non-traditional settings where the key elements of agency theory, such as self-interest, information asymmetry, and the mechanisms used to control agency costs can vary beyond the narrow assumptions implied in traditional agency-based research. We suggest that extending agency theory to diverse settings using a deductive approach can be accomplished by formally recognizing and incorporating the institutional context surrounding principal–agent (P–A) relations into agency-based models. Thus, criticisms that agency theory fails to acknowledge the social context in which P–A relations occur provides not a barrier but an opportunity for extending our understanding of P–A relations to a variety of diverse contexts.

Keywords

agency theory, corporate governance, principal-agent relations, social context

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