Active agents, passive principals: the role of the chief executive in corporate strategy formulation and implementation

Detalhes bibliográficos
Autor(a) principal: Raposo, Clara C.
Data de Publicação: 2000
Outros Autores: Dow, James
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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spelling 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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