Agency theory

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  • Avatar of Saline
    Saline
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    In bpp it is written that

    “Agency theory proposes that, although individual members of business tema act in their own self interest, the well-being of each individual depends on the well-being of other team members and on the performance of the team in competition with other teams”

    Can you please elaborate what does this mean.

    Thanks a lot


    Avatar of johnmoffat
    John Moffat
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    Let me give you an example.

    I don’t know where you work, but I guess that you want to do well yourself (and get paid more / get promoted etc.). That is your own self-interest.

    However, you also need your company to stay in business and to be more profitable (so that they can afford to pay you more etc.) and for this you need the other people working round you to be working well also. This is the performance of the team.

    Hope that helps.


    Avatar of Saline
    Saline
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    Thanks a lot :)


    Avatar of Saline
    Saline
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    • Topics: 20
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    What do we mean by “Transaction Cost Economics” theory ?

    Can you please shed some light on it.

    Thank you so much :)


    Avatar of johnmoffat
    John Moffat
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    In very simple terms it is the idea that firms produce their own goods (instead of having them made by someone else) when the costs of doing it themselves is cheaper.
    There is a much fuller explanation on Wikipedia – if you do a Google search you will find it.

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