¶ Principal-Agent Theory

"Principal-agent theory" refers to a situation in which an agent is empowered to take action on behalf of, or that impact, a second party (the principal).

Muller's usage in The Tyranny of Metrics describes the belief the the CEO’s sole interest is the profitable growth of the company, whereas an employee's interest is their own. Muller suggests there is asymmetry between the CEO's role to act as an agent in the best interest of the (principal) shareholders and the employee's self-interest. Muller argues that quantifying employee performance enables the CEO to align employee interests with those of the shareholders expecting to see continual growth.


Related

Citations

Muller, Jerry Z. The Tyranny of Metrics. Princeton: Princeton University Press, 2018.


Backlinks