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.<\/p>\n
Corporate governance<\/strong> Corporate strategy<\/strong> 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.<\/p>\n Sumber: 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 […]<\/p>\n","protected":false},"author":10,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-393","post","type-post","status-publish","format-standard","hentry","category-article"],"_links":{"self":[{"href":"https:\/\/bbs.binus.ac.id\/management\/wp-json\/wp\/v2\/posts\/393","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bbs.binus.ac.id\/management\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bbs.binus.ac.id\/management\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bbs.binus.ac.id\/management\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/bbs.binus.ac.id\/management\/wp-json\/wp\/v2\/comments?post=393"}],"version-history":[{"count":1,"href":"https:\/\/bbs.binus.ac.id\/management\/wp-json\/wp\/v2\/posts\/393\/revisions"}],"predecessor-version":[{"id":394,"href":"https:\/\/bbs.binus.ac.id\/management\/wp-json\/wp\/v2\/posts\/393\/revisions\/394"}],"wp:attachment":[{"href":"https:\/\/bbs.binus.ac.id\/management\/wp-json\/wp\/v2\/media?parent=393"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bbs.binus.ac.id\/management\/wp-json\/wp\/v2\/categories?post=393"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bbs.binus.ac.id\/management\/wp-json\/wp\/v2\/tags?post=393"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nThe 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.<\/p>\n
\nTop 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.<\/p>\n
\nJenkins, M., Ambrosini, V., & Collier, N. (2016). Advanced Strategic Management. New York: Palgrave.<\/p>\n","protected":false},"excerpt":{"rendered":"