Active agents, passive principals: the role of the chief executive in corporate strategy formulation and implementation
Autor(a) principal: | |
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Data de Publicação: | 2000 |
Outros Autores: | |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.5/24366 |
Resumo: | In this paper we use agency theory to study the active role of the chief executive in the formulation of corporate strategy. Unlike traditional applications of agency theory, we allow the aggent (CEO) to play a role in defining the parameters of the agency problem. We argue that CEOs willhave oncentive to propose difficult, ambigious strategies for the corporations. The effect arises becuase in equillibium, the agent may be overcompensated in the sense that the participation constraint is not binding in determining his compensation. The agent can exploit this by proposing ambitious corporate strategies, thereby influencing the parameters of the constraints in the agency problem. The principal (the owners of the company) can mitigate this by precommitting to pay high compensation regardless of the manager's chosen strategy, but may optimally perfer not to do so |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Active agents, passive principals: the role of the chief executive in corporate strategy formulation and implementationAgency TheoryExecutive CompensationFree-Cash-Flow TheoryStrategic ComplexityIn this paper we use agency theory to study the active role of the chief executive in the formulation of corporate strategy. Unlike traditional applications of agency theory, we allow the aggent (CEO) to play a role in defining the parameters of the agency problem. We argue that CEOs willhave oncentive to propose difficult, ambigious strategies for the corporations. The effect arises becuase in equillibium, the agent may be overcompensated in the sense that the participation constraint is not binding in determining his compensation. The agent can exploit this by proposing ambitious corporate strategies, thereby influencing the parameters of the constraints in the agency problem. The principal (the owners of the company) can mitigate this by precommitting to pay high compensation regardless of the manager's chosen strategy, but may optimally perfer not to do soLondon Business School : Said Business SchoolRepositório da Universidade de LisboaRaposo, Clara C.Dow, James2022-05-24T18:05:07Z2000-102000-10-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.5/24366engRaposo, Clara C. and James Dow .(2000). “Active agents, passive principals: the role of the chief executive in corporate strategy formulation and implementation”. London Business School : Said Business School.info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-03-06T14:54:01Zoai:www.repository.utl.pt:10400.5/24366Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T17:08:26.009470Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Active agents, passive principals: the role of the chief executive in corporate strategy formulation and implementation |
title |
Active agents, passive principals: the role of the chief executive in corporate strategy formulation and implementation |
spellingShingle |
Active agents, passive principals: the role of the chief executive in corporate strategy formulation and implementation Raposo, Clara C. Agency Theory Executive Compensation Free-Cash-Flow Theory Strategic Complexity |
title_short |
Active agents, passive principals: the role of the chief executive in corporate strategy formulation and implementation |
title_full |
Active agents, passive principals: the role of the chief executive in corporate strategy formulation and implementation |
title_fullStr |
Active agents, passive principals: the role of the chief executive in corporate strategy formulation and implementation |
title_full_unstemmed |
Active agents, passive principals: the role of the chief executive in corporate strategy formulation and implementation |
title_sort |
Active agents, passive principals: the role of the chief executive in corporate strategy formulation and implementation |
author |
Raposo, Clara C. |
author_facet |
Raposo, Clara C. Dow, James |
author_role |
author |
author2 |
Dow, James |
author2_role |
author |
dc.contributor.none.fl_str_mv |
Repositório da Universidade de Lisboa |
dc.contributor.author.fl_str_mv |
Raposo, Clara C. Dow, James |
dc.subject.por.fl_str_mv |
Agency Theory Executive Compensation Free-Cash-Flow Theory Strategic Complexity |
topic |
Agency Theory Executive Compensation Free-Cash-Flow Theory Strategic Complexity |
description |
In this paper we use agency theory to study the active role of the chief executive in the formulation of corporate strategy. Unlike traditional applications of agency theory, we allow the aggent (CEO) to play a role in defining the parameters of the agency problem. We argue that CEOs willhave oncentive to propose difficult, ambigious strategies for the corporations. The effect arises becuase in equillibium, the agent may be overcompensated in the sense that the participation constraint is not binding in determining his compensation. The agent can exploit this by proposing ambitious corporate strategies, thereby influencing the parameters of the constraints in the agency problem. The principal (the owners of the company) can mitigate this by precommitting to pay high compensation regardless of the manager's chosen strategy, but may optimally perfer not to do so |
publishDate |
2000 |
dc.date.none.fl_str_mv |
2000-10 2000-10-01T00:00:00Z 2022-05-24T18:05:07Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.5/24366 |
url |
http://hdl.handle.net/10400.5/24366 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
Raposo, Clara C. and James Dow .(2000). “Active agents, passive principals: the role of the chief executive in corporate strategy formulation and implementation”. London Business School : Said Business School. |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
London Business School : Said Business School |
publisher.none.fl_str_mv |
London Business School : Said Business School |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
repository.mail.fl_str_mv |
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1799131178520805376 |