MAN 709/808 – Contemporary Management Topics: Corporate Governance and Ethics. Week 5 Corporate Governance Theories. Corporate Governance.
Corporate Governance Theories
In terms of game theory, it involves changing the rules of the game so that the self-interested rational choices of the agent coincide with what the principal desires.
Financial and non-financial rewards:
Non-financial rewards: Motivational factors of Herzberg Job satisfiers: achievement, recognition, responsibility and advancement.
Job dissatisfiers: salary, working conditions and company policy.
Mechanisms: “piece rates, [share] options, discretionary bonuses, promotions, profit sharing, efficiency wages, deferred compensation, and so on.” (Prendergast 1999, 7)
Contracts: Informativeness Principle; Incentive-Intensity Principle; Monitoring Intensity Principle, and Equal Compensation Principle.
The steward believes that:
are more likely to serve organizational ends.
generally result in principal-steward relationship.