Comprendre la théorie de l’agence [Philippe Gattet]

Agency Theory

Agency theory examines how to make cooperation more effective when people have differing interests. Developed by economists Michael Jensen and William Meckling in 1976, it treats a company as a set of contractual relationships. The theory builds on earlier work by Adolf Berle and Gardiner Means on conflicts between shareholders and managers.

Core Framework

• Principal–agent relationship: A principal, such as a shareholder or manager, delegates decision-making authority to an agent, such as a company executive or employee.
• Information asymmetry: The parties have different information, and neither has complete information.
• Moral hazard: An agent may act differently from what the principal expects, particularly when their incentives diverge.
• Agency costs: Costs associated with aligning the agent’s behavior with the principal’s goals:
  • Monitoring costs: Paid by the principal to oversee or guide the agent.
  • Signaling or bonding costs: Borne by the agent to demonstrate that the arrangement is functioning properly.
  • Residual loss: The unavoidable gap between the outcome achieved and the outcome that would best serve the principal.

Business Example: Shareholders and Managers

Shareholders entrust managers with capital and responsibility for running the business, expecting them to increase shareholder value. Managers may have more information about the company, however, and may pursue their own interests—for example, by seeking higher compensation or making resource-allocation decisions that differ from shareholders’ preferences or time horizons.

Governance and Incentive Mechanisms

Companies can reduce conflicts of interest through:

• Boards of directors and shareholder participation at general meetings, where shareholders can express views on strategic decisions.
• Stock options and employee share ownership, which link compensation to company ownership.
• Variable management compensation tied to financial, accounting, or stock-market performance.

Agency theory also applies beyond shareholder–manager relationships, including managers and employees, investors and management companies, and franchisors and franchisees.

Metrics and Timelines

• The theory was developed in 1976; the underlying discussion of divergence between shareholders and managers dates to work in the 1930s.
• No specific financial KPIs, numerical targets, or implementation timelines are provided.

Presenter/source: Philippe Gattet, Xerfi.