Linking The Agency Theory Perspective To Strategic Management, Part I
Agency theory addresses vertical links of ownership and control at multiple levels across the borders of firms and within the firm’s boundaries. Classically strategists have focused upon the narrow hierarchical relationship between investors (principals) and top-level executives (agents) on the basis that this relationship is related directly to firm strategy and outcome. However more recent research has focused upon the implications of a more extended set of agency relationships, both vertically and horizontally. The extent and relevance of agency theory is discussed in the following sections: Corporate Governance, Corporate Strategy, Competitive Strategy, and Control.
Corporate governance
The central concern of corporate governance is the relationship among stakeholders that is used to determine and control the strategic direction and performance of the firm. Four main mechanisms exist which influence the extent to which an agency relationship may be controlled and monitored. These are (1) the monitoring capacity of investors; (2) the influence of the board of directors; (3) setting executive compensation; and (4) the market for corporate control.
Corporate strategy
Top managers expect their corporate level strategy to help their firm gain/maintain a competitive advantage and earn above average returns for their shareholders and themselves. The businesses in their portfolio should be worth more through their management than if they stood on their own. The central concerns for corporate strategy are (i) which businesses should their firm be in (and should be exiting), and (ii) how to manage the business portfolio which may be in very different industry, product and geographic areas. This raises questions about the extent to which a firm should diversify and here the benefits to managers and owners can vary and potentially lead to an agency problem.
Diversification generally leads to an increase in the overall size of the firm, which is positively associated with size of executive compensation. This is clearly in the interests of top managers, not only in terms of financial reward but also in terms of status and reputation. The increased complexity of the business may also be a rationale for greater pay. Diversification also serves to reduce risk to managers of loss of employment, earnings and risk, as the firm is less exposed to downturns in a particular industry, product and geography.
Sumber:
Jenkins, M., Ambrosini, V., & Collier, N. (2016). Advanced Strategic Management. New York: Palgrave.
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Tasliyah Athaya Nahdah The agency theory is really helpful for the company or organization, as mentioned in the article, it helps to increase the company scope so they would expand and get a higher chance to have better company performance that will be affecting their income. Although the agency theory has its own risks such as the agency does not focus on the principal and lead to relationship problem from one party to another one. However, I agree that diversification could help to minimize the risks. Tasliyah Athaya Nahdah 2301926005
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Gemerlang Adhityatama How, agency theory that can affect starting from corporate governance and company strategy. The theory also manages, monitors, and determines the company to be planned. This gives rise to a competitive advantage with monitoring towards high importance. The extent to which agency theory is likely to be positively appropriate for profit is implemented. In measuring the company's performance with a significant level of soaring in the effectiveness and efficiency of a company.
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Cellila Aditama With corporate governance applied it will refers to the way companies to do their purpose plus identifies who makes the decision and has the power. By using the corporate strategy, it will help to gain competitive advantage over other participants and at the same time enable to deliver the stakeholder promises. Overall agency theory help to understand the relationships between agents and principals. In general, it is the relationship between shareholders, as principals, and company executives, as agents. Cellila Aditama - 2301875931
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Laurent Angelica Santoso - 2301912510 The application of agency theory to corporate strategy is remarkable. The corporation attempts to diversify where managers and owners can potentially generate agency issues. Investors (principals) and top-level executives (agents) may have opposing viewpoints and objectives, with investors seeking cash benefits while executives also regard status and reputation.
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Kitsy Chelles Kitsy Chelles - 2301902655. This article discusses agency theory which is related to one of the relevance of corporate strategy, where agency theory suggests that to overcome agency problems in company management, a control mechanism is needed that can align the interests of managers and shareholders. So that share ownership by managers is expected to align these interests.
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Nyiayu Olivia Miranda Bakrie Dear Mr. Bayu, Thank you ever so much for the article. This is helpful for me in learning more about the agency theory and how it can mitigate the differences between the shareholders and the agents (managements) below it. I really am interested in learning more about the corporate strategy and the four mechanism that goes with it; it's the way compensation can really become the solution to many problems one face in an organisation that really is interesting for me. Nyiayu Olivia Miranda Bakrie, 2301924965
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Elysia Elverda 2301951695 It says, the increased complexity of the business may also be a rationale for greater pay. And the diversification also serves to reduce risk to managers of loss of employment, earnings and risk, as the firm is less exposed to downturns in a particular industry, product and geography. But is this increased diversification worth the cost? Connected with agency theory, this will certainly make a tricky consideration for shareholders
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Gilang Rafi Chandra This article discusses how companies manage with agency theory. Where this strategy is based on a fairly narrow relationship between investors or principals and top-level executives or what is called an agency that this relationship has ties to the influence of what is generated by the company. With the existence of new researchers who discuss broader agency theory such as in managing corporate strategy and competitive strategy. With this strategy, the agency or top manager can help to maintain their advantage in the company. Gilang Rafi Chandra - 2301955812
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Gilang Rafi Chandra I'm beyond thankful for the new insight that I got from this Article. the existence of corporate governance is able to help in terms of controlling the direction of the strategy and its performance. Therefore, it is wise to note that there must be a synergy in using agency theory and proper understanding between principal and Agent to achieve organizational goals efficiently and effectively. Gilang Rafi Chandra - 2301955812
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Athallah Ragita Firdian this article helps me to understand that a theory that explains the relationship that occurs between the management of the company as an agent and the owner of the company as the principal. The purpose and benefits of agency theory is to evaluate the results of the employment contract between the principal and the agent. Whether the cooperation contract has run according to what has been agreed or not. Athallah Ragita Firdian - 2301918281
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Andrew Kusumajati From what I get, Agency Theory were used to explain and solve problems in the relationship between business people and their agents. Most commonly, that relationship is the relationship between shareholders, as principals, and company executives, as agents. It focused on two individuals, the principal and the agent, which helps them to understand each conflicts of interest that may occur between the principal and the agent. More or less, Thanks for the great article. Andrew Kusumajati // 2301942955
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Wilbert Lionel Wilbert Lionel - 2301866984. this article explains what the agency theory covers. there are two point of views given which is the corporate governance that talks about how the relationship between stakeholders and top executives is. then, this leads us up to what might be the issue of these relationships, as explained in corporate strategy part. However, the different interests can be solved with diversification which will give mutual benefits for both stakeholders and top executives.
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Michael This article really helpfull for people to study about agency theory, from this article i learn how to control and monitor an agency relationship. I can conclude what is the managers goals and what they needs to achieve that goals. I also learned that diversification indirectly strengthen the managers position in the company. Michael - 2301859133
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Ziyadur Rozaq Fathoni Overall what I get from this article is, This agency theory discusses how the vertical relationship of ownership and control at various levels crosses corporate boundaries and within company boundaries. Classically, strategists have focused on narrow hierarchical relationships between investors or what one might call “principals” and top-level executives who might be called “agents” on the basis that these relationships are directly related to the firm's strategy and results. Ziyadur Rozaq Fathoni - 2301953214
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Alroy Sayuti On agency theory, focuses on a narrow hierarchical relationship between investors (principals) and top-level executives (agents) on the basis that these relationships are directly related to company strategy and results. With this agency theory can help to explain and solve various agency problems. Alroy Sayuti - 2301861554
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Suci Chaerunisah from this article, i learned how agency theory helps companies to achieve a goal and reduce conflicts within the company by focusing on a series of mechanisms relevant to agency theory discussed in the following section corporate governance, corporate strategy, competitive strategy, and control. Suci Chaerunisah - 2301925362
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Kelvin Through the article above, when an error occurs or has a different view between the agent and the principal, there will be an agency problem caused by a dispute between the agent and the principal. Kelvin - 2301958133
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Dea Yolandri From the article, in corporate governance, there is an agency theory that explains the relationship between shareholders and company managers. However, agency theory usually tends to focus on individual interests. The article explains that agency theory currently has a wider range of relationships with shareholders, both vertically and horizontally. So from agency theory, existing corporate governance can be used to determine and control the strategic direction and performance of the company. Dea Yolandri - 2301868655
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latifany rahmadina fajrin This article really helped me to understand about agency theory. where there is a point of view on corporate governance. - Latifany Rahmadina Fajrin 2301905884
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Upekkha AriyaPutera Wijaya Dari artikel ini, saya belajar bahwa terdapat 2 bagian, yaitu Corporate Governance dan Corporate Strategy. Dimana didalam Corporate Governance menjelaskan tentang hubungan antara pemangku kepentingan yang digunakan untuk menentukan dan mengendalikan arah strategis dan kinerja perusahaan. Dan didalam Corporate Strategy menjelaskan bagaimana cara mendapatkan/mempertahankan keunggulan kompetitif dan mendapatkan pengembalian di atas rata-rata untuk pemegang saham dan diri mereka sendiri. Upekkha AriyaPutera Wijaya - 2301855835
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steven jose andreas didalam artikel ini saya bisa menyimpulkan bahwah Corporate Governance dan strategi dari sebuah perusahaan memang harus bisa berjalan dengan beriringan satu sama lain. jika salah satu dari mereka tidak bisa berjalan dengan baik maka bisa di pastikan sebuah organisasi tersebut tidak bisa berjalan dengan sempurna pula, disini kita juga bisa menemukan arti dari teori agensi sendiri yaitu adalah sebuah teori yang mengatur tentang hubungan vertikal yang memang ada diperusahaan tersebut. dimana artinya pemegang saham harus bisa ambil andil dalam membangun kinerja perusahaan yang baik, namun tetap memperhatikan dengan Corporate strategi yang ada sehingga semua hal tersebut harus terhubung satu sama lain dengan baik steven jose andreas 2301855892
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Garry Rahardja This article helps other students to understand agency theory. The theory also tells about managing properly as well as making decisions within the company. By using this agency strategy, a company can maintain its superiority over its competitors. Garry Rahardja - 2301871763
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Nico Alexsander Dari artikel tersebut saya sangat terbantu sekali untuk lebih memahami apa itu teori agency sehingga saya dapat mempelajari lebih dalam. Selain itu, membahas tentang strategi perusahaan juga sangat menarik untuk dibahas sehingga artikel ini sangat berguna bagi kita semua untuk menambah wawasan serta pengetahuan. Nico Alexsander - 2301883170
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Nico Alexsander Dari artikel tersebut saya sangat terbantu sekali untuk lebih memahami apa itu teori agency sehingga saya dapat mempelajari lebih dalam. Selain itu, membahas tentang strategi perusahaan juga sangat menarik untuk dibahas sehingga artikel ini sangat berguna bagi kita semua untuk menambah wawasan serta pengetahuan. Nico Alexsander - 2301883170
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Mudhita Vanesia Dari apa yang telah saya baca diatas, artikel tersebut sangatlah membantu saya dalam pemahaman mengenai corporate governance dan corporate strategy, yang mana keduanya saling berhubungan. Jadi jika sebuah perusahaan atau organisasi ingin berjalan dengan baik maka perusahaan atau organisasi harus memiliki kedua hal tersebut, jika salah satu dari hal tersebut tidak ada maka perusahaan atau organisasi tidak dapat dan gagal mencapai tujuannya. Mudhita Vanesia - 2301861485
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Fajar Harun - 2301927310 Pada tulisan diatas saya bisa menyimpulkan bahwa artikel ini menjelaskan bagaimana Menghubungkan Perspektif Teori Agensi Dengan Manajemen Strategis yangmembahas hubungan vertikal kepemilikan dan kontrol di berbagai tingkat serta melintasi batas perusahaan dan dalam batas-batas perusahaan yang wajar. ahli strategi telah berfokus pada hubungan hierarkis yang sempit antara investor dan eksekutif tingkat, oleh karna itu dasar hubungan ini secara langsung terkait dengan strategi dan hasil perusahaan. Ini adalah kapasitas pemantauan investor, pengaruh dewan direksi, menetapkan kompensasi eksekutif, dan pasar pada perusahaan. Top Manager mengharapkan strategi tingkat korporat mereka untuk membantu perusahaan mereka memperoleh/mempertahankan keunggulan kompetitif dan memperoleh pengembalian di atas rata-rata bagi pemegang saham dan diri mereka sendiri.
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Tasya Giovanni This article helps me in understanding agency theory problem in corporate governance and corporate strategy to gain, increase, or maintain company competitive advantage. These two things are very interconnected to improve company performance. Tasya Giovanni - 2301911224
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Suci Chaerunisah Dari artikel ini saya belajar, bagaimana theory keagenan membantu perusahaan untuk mencapai suatu tujuan dan mengurangi terjadinya konflik dalam perusahaan dengan berfokus pada serangkaian mekanisme yang relevensi pada teori keagenan yaitu yang dibahas dalam bagian tata kelola perusahaan, strategi perusahaan, strategi kompetitif dan kontrol. Suci Chaerunisah - 2301925362
