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Agency Problems in Diverse Contexts: A Global Perspective

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  • Luis Gomez‐Mejia
  • Robert M. Wiseman
  • Bernadine Johnson Dykes

Abstract

abstract Bruce, Buck and Main (2005) offer two criticisms of agency theory as a valid model of executive behaviour. First, they suggest that because researchers have failed to find a strong empirical link between executive pay and firm performance, and since this research generally rests on models derived from agency theory, then we must question the theory. Second, they suggest that agency theory is under‐socialized and therefore lacks generalizability to settings where social solutions would seem to eliminate the agency problem. In our response we make three points. First, agency theory rests on an assumption of self‐interest that does not necessarily reflect opportunism. Second, agency theory does not make any reference to pay‐performance sensitivity, and the failure of this research can be attributable to a variety of problems with the research. Third, we agree that agency theory does not explicitly recognize contextual factors, but suggest that this abstraction from context, gives agency theory greater generalizability. Finally, we review the UK and German contexts discussed by Bruce, Buck and Main to show that socialized solutions do not prevent the occurrence of agency problems.

Suggested Citation

  • Luis Gomez‐Mejia & Robert M. Wiseman & Bernadine Johnson Dykes, 2005. "Agency Problems in Diverse Contexts: A Global Perspective," Journal of Management Studies, Wiley Blackwell, vol. 42(7), pages 1507-1517, November.
  • Handle: RePEc:bla:jomstd:v:42:y:2005:i:7:p:1507-1517
    DOI: 10.1111/j.1467-6486.2005.00554.x
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    References listed on IDEAS

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    1. Jan Svejnar, 2003. "Structural Reforms and Competitiveness: Will Europe Overtake America?," William Davidson Institute Working Papers Series 545, William Davidson Institute at the University of Michigan.
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    Cited by:

    1. Otten, Jordan J.A. & Heugens, Pursey P.M.A.R, 2007. "Extending the managerial power theory of executive pay: A cross national test," MPRA Paper 6778, University Library of Munich, Germany.
    2. Leone Leonida & Marianna Marra & Sergio Scicchitano & Antonio Giangreco & Marco Biagetti, 2020. "Estimating the Wage Premium to Supervision for Middle Managers in Different Contexts: Evidence from Germany and the UK," Work, Employment & Society, British Sociological Association, vol. 34(6), pages 1004-1026, December.
    3. Elodie Gentina & Thomas Li-Ping Tang & Qinxuan Gu, 2017. "Does Bad Company Corrupt Good Morals? Social Bonding and Academic Cheating among French and Chinese Teens," Journal of Business Ethics, Springer, vol. 146(3), pages 639-667, December.
    4. Geoffrey P. Martin & Robert M. Wiseman & Luis R. Gomez-Mejia, 2020. "The Ethical Dimension of Equity Incentives: A Behavioral Agency Examination of Executive Compensation and Pension Funding," Journal of Business Ethics, Springer, vol. 166(3), pages 595-610, October.
    5. Flamini, Giulia & Pittino, Daniel & Visintin, Francesca, 2022. "Family leadership, family involvement and mutuality HRM practices in family SMEs," Journal of Family Business Strategy, Elsevier, vol. 13(2).
    6. Ahlers, Oliver & Hack, Andreas & Kellermanns, Franz W., 2014. "“Stepping into the buyers’ shoes”: Looking at the value of family firms through the eyes of private equity investors," Journal of Family Business Strategy, Elsevier, vol. 5(4), pages 384-396.
    7. Gomez-Mejia, Luis R. & Mendoza-Lopez, Anabel & Cruz, Cristina & Duran, Patricio & Aguinis, Herman, 2024. "Socioemotional wealth in volatile, uncertain, complex, and ambiguous contexts: The case of family firms in Latin America and the Caribbean," Journal of Family Business Strategy, Elsevier, vol. 15(1).
    8. Mixon Jr., Franklin G. & Gómez-Mejia, Luis R., 2020. "The Competitive Struggle to Win Tournaments: The Allies’ Race to Capture Adolf Hitler’s Eagle’s Nest," American Business Review, Pompea College of Business, University of New Haven, vol. 23(1), pages 3-17, May.
    9. Sunny Sun & Xia Zhao & Haibin Yang, 2010. "Executive compensation in Asia: A critical review and outlook," Asia Pacific Journal of Management, Springer, vol. 27(4), pages 775-802, December.
    10. Thomas Li-Ping Tang & Toto Sutarso & Mahfooz A. Ansari & Vivien Kim Geok Lim & Thompson Sian Hin Teo & Fernando Arias-Galicia & Ilya E. Garber & Randy Ki-Kwan Chiu & Brigitte Charles-Pauvers & Roberto, 2018. "Monetary Intelligence and Behavioral Economics Across 32 Cultures: Good Apples Enjoy Good Quality of Life in Good Barrels," Journal of Business Ethics, Springer, vol. 148(4), pages 893-917, April.
    11. Chizema, Amon & Buck, Trevor, 2006. "Neo-institutional theory and institutional change: Towards empirical tests on the "Americanization" of German executive pay," International Business Review, Elsevier, vol. 15(5), pages 488-504, October.
    12. Otten, J.A. & Heugens, P.P.M.A.R., 2007. "Extending the Managerial Power Theory of Executive Pay: A Cross National Test," ERIM Report Series Research in Management ERS-2007-090-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    13. Lucia Naldi & Carmelo Cennamo & Guido Corbetta & Luis Gomez–Mejia, 2013. "Preserving Socioemotional Wealth in Family Firms: Asset or Liability? The Moderating Role of Business Context," Entrepreneurship Theory and Practice, , vol. 37(6), pages 1341-1360, November.
    14. Thomas Li-Ping Tang & Toto Sutarso & Mahfooz A. Ansari & Vivien K. G. Lim & Thompson S. H. Teo & Fernando Arias-Galicia & Ilya E. Garber & Randy Ki-Kwan Chiu & Brigitte Charles-Pauvers & Roberto Luna-, 2018. "Monetary Intelligence and Behavioral Economics: The Enron Effect—Love of Money, Corporate Ethical Values, Corruption Perceptions Index (CPI), and Dishonesty Across 31 Geopolitical Entities," Journal of Business Ethics, Springer, vol. 148(4), pages 919-937, April.
    15. Elisaveta Sardžoska & Thomas Tang, 2009. "Testing a Model of Behavioral Intentions in the Republic of Macedonia: Differences Between the Private and the Public Sectors," Journal of Business Ethics, Springer, vol. 87(4), pages 495-517, July.
    16. Jiandong Chen & Douglas Cumming & Wenxuan Hou & Edward Lee, 2016. "CEO Accountability for Corporate Fraud: Evidence from the Split Share Structure Reform in China," Journal of Business Ethics, Springer, vol. 138(4), pages 787-806, November.
    17. Hannah S. Lee & David A. Griffith, 2012. "Comparative insights into the governance problems of agency theory: the influence of institutional environment on the basic human tenets," AMS Review, Springer;Academy of Marketing Science, vol. 2(1), pages 19-33, March.
    18. Photis Lysandrou & Offiong Helen Solomon & Thomas Goda, 2016. "The Differential Impact of Public and Private Governance Institutions on the Different Modes of Foreign Investment," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(6), pages 729-746, November.
    19. Pier Luigi Marchini & Tatiana Mazza & Alice Medioli, 2020. "Corruption and sustainable development: The impact on income shifting in European international groups," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 717-730, March.
    20. Borah, Dhruba & Ellwood, Paul, 2022. "The micro-foundations of conflicts in joint university-industry laboratories," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    21. Otten, J.A., 2008. "Theories on executive pay. A literature overview and critical assessment," MPRA Paper 6969, University Library of Munich, Germany.

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