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Management & Leadership vocabulary · Corporate Governance

Agency theory

Meaning in management & leadership, with examples

nounAdvanced term

In management & leadership, agency theory means: A theory examining relationships in which one party acts for another, especially problems of differing interests and unequal information.

In Turkish: vekâlet kuramı

How it is used

Use to analyse delegation, incentives and monitoring; the principal assigns work and the agent acts on their behalf.

Example sentences

  1. Agency theory helped the board examine why managers preferred expansion over returning surplus cash.

    Those managing resources may have preferences different from those they represent.

  2. The course used agency theory to discuss information gaps between owners and executives.

    Unequal information can make delegated actions difficult to evaluate.

Common collocations

  • apply agency theory
  • agency theory and governance
  • shareholderA person or organisation that owns shares in a company, and therefore part of it, usually with the right to vote at general meetings and to receive dividends.
  • accountabilityThe duty to answer for the result of a task or decision, which includes explaining what happened and accepting the consequences, even if others did the work.

More terms: Corporate Governance

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