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Global Encyclopedia of Public Administration, Public Policy, and Governance pp 1–6Cite as

Agency Theory in Organizations

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Synonyms

Conflicts of interest; Financial economics

Definition

Agency theory is concerned with a specific class of transactional relationships, those involving actors with partially conflicting interests, which are potentially fraught by imperfect and/or asymmetric information.

Introduction

In this particular class of transactions, the dyad comprises a nominal superior and a nominal subordinate – in the literature of social institutions, master-servant, supervisor-supervisee, employer-employee, or principal-agent relationships. Hence, unlike other strategic relationships, we presume that the preferences of one of the parties, those of the nominal superior, are somehow more legitimate than those of the other. This presumption is fundamental to an understanding of the concept.

Shakespeare’s Tragedy of Romeo and Julietaptly illustrates the nature of the agency relationship. In this story, a young lady, Juliet, entertains proposals from various suitors. She selects Romeo, based on ex...

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Author information

Authors and Affiliations

  1. Atkinson Graduate School of Management, Willamette University, 900 State Street, Salem, OR, 97301, USA

    Fred Thompson

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  1. Fred Thompson
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Corresponding author

Correspondence to Fred Thompson .

Editor information

Editors and Affiliations

  1. Florida Atlantic University, Boca Raton, Florida, USA

    Ali Farazmand

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Thompson, F. (2016). Agency Theory in Organizations. In: Farazmand, A. (eds) Global Encyclopedia of Public Administration, Public Policy, and Governance. Springer, Cham. https://doi.org/10.1007/978-3-319-31816-5_88-1

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  • DOI: https://doi.org/10.1007/978-3-319-31816-5_88-1

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  • Publisher Name: Springer, Cham

  • Online ISBN: 978-3-319-31816-5

  • eBook Packages: Springer Reference Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences

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