Principal-agent relationships on the stewardship-agency axis

Abstract

T HIS ARTICLE PROVIDES an overview of the literature on nonprofit principal-agent relationships. It depicts the nature of agency theory and stewardship theory, analyzes the origin of their struggle within the nonprofit structure, and marks directions for a conciliatory approach.Note: We gratefully acknowledge Scott Gassler, Bruno Heyndels, the three anonymous reviewers, and editor Roger Lohmann for their constructive comments.

The Influence of Presence and Position of Women on the Boards of Directors: The Case of NHS Foundation Trusts

“…Bouckaert and Vandenhove, 1998;Gazley et al, 2010;Connolly et al, 2013;Wellens and Jegers, 2013). The stewardship theory is seen as a particular case of the agency theory in which the owner (principal) and the management (agents) have similar objectives, thus, minimising traditional principal-agent conflicts (Caers et al, 2006). Connolly et al (2013) consider stakeholder theory as the obvious theory to be applied in the public and not-for-profit sectors because it is accepted that, in the absence of shareholders, other stakeholders influence managerial decisions.…”

Determinants of Organizational Design Choices in Spanish Nongovernmental Development Organizations

“…Although the application of agency theory is widespread throughout the literature on the for-profit sector, little consensus seems to exist on the applicability of classical agency theory in the case of non-profit organizations [10], [11] and it is not yet commonly used to describe labour relations in non-profit organizations. Still, as [12] notes, there is no basis to think that non-profit organizations are spared from "moral hazard, opportunism, adverse selection and other problems of asymmetric information".…”

“…Still, as [12] notes, there is no basis to think that non-profit organizations are spared from "moral hazard, opportunism, adverse selection and other problems of asymmetric information". Agency theory framework can be applied to nonprofit organizations if some peculiarities of this sector are taken into consideration as shown several empirical and theoretical studies [11], [13], [14], [15], [16], [17]. More research is therefore needed.…”

“…Principal-agent relations in non-profit organizations are even more problematic than in for-profit firms because of the lack of ownership incentives, complex and vague mission [15], lack of a single overriding objective [11] and even the absence of consensus on the identity of one single principal [14].…”

“…Agency theory generally assumes the agent is not very keen on taking risks: that is, the agent is assumed to be riskaverse (he/she will prefer a fixed compensation instead of incentive compensation that yields the same average amount), so the agent can only be persuaded to opt for incentive compensation when the average compensation level is significantly higher than the one under the fixedcompensation option [11]. This compensation, called the risk premium, is the incentive related-cost of delegation.…”