Fairness, envy, guilt and greed: Building equity considerations into agency theory

In this article we examine the extent to which fairness considerations are salient to senior executives, and consider the implications for agency theory, tournament theory and the design of top-management incentives. We look for patterns in a unique data set of senior executive preferences and seek...

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Bibliographic Details
Published inHuman relations (New York) Vol. 68; no. 8; pp. 1291 - 1314
Main Authors Pepper, Alexander, Gosling, Tom, Gore, Julie
Format Journal Article
LanguageEnglish
Published London, England SAGE Publications 01.08.2015
SAGE PUBLICATIONS, INC
Subjects
Agency theory
Envy
Executives
Fairness
Greed
Guilt
Human relations
Incentives
Studies
Upper management
fairness
tournament theory
executive pay
agency theory
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Summary:In this article we examine the extent to which fairness considerations are salient to senior executives, and consider the implications for agency theory, tournament theory and the design of top-management incentives. We look for patterns in a unique data set of senior executive preferences and seek explanations for these patterns using a model of fairness first advanced by Fehr and Schmidt in 1999. We propose a number of amendments to Fehr and Schmidt’s model. We challenge some of the standard tenets of agency theory and tournament theory, demonstrating why equity considerations should be taken into account. We add to the growing literature on behavioural agency theory.
ISSN:0018-7267
1741-282X
DOI:10.1177/0018726714554663