The problem of unilateralism in agency theory: towards a bilateral formulation

Pouryousefi, Sareh; Frooman, Jeff

Abstract

Some business ethicists view agency theory as a cautionary tale – a proof that it is impossible to carry out successful economic interactions in the absence of ethical behaviour. The cautionary-tale view presents a nuanced normative characterisation of agency, but its unilateral focus betrays a limited understanding of the structure of social interaction. This article moves beyond unilateralism by presenting a descriptive and normative argument for a bilateral cautionary-tale view. Specifically, we discuss hat swaps and role dualism in asymmetric-information principal-agent relationships and argue that the norm of reciprocity can function as a moral solution to agency risks in adverse-selection and moral-hazard problems. Our novel bilateral cautionary-tale formulation extends the normative boundaries of the asymmetric-information stream of agency theory, while leaving the fundamental economic assumptions of agency theory intact.

Citation

Pouryousefi, S., & Frooman, J. (in press). The problem of unilateralism in agency theory: towards a bilateral formulation. Business Ethics Quarterly, 27(2), https://doi.org/10.1017/beq.2016.77

• Journal Article Type: Article
• Acceptance Date: Aug 14, 2016
• Online Publication Date: Feb 28, 2017
• Deposit Date: Feb 9, 2017
• Publicly Available Date: Feb 28, 2017
• Journal: Business Ethics Quarterly
• Print ISSN: 1052-150X
• Electronic ISSN: 2153-3326
• Publisher: Philosophy Documentation Center
• Peer Reviewed: Peer Reviewed
• Volume: 27
• Issue: 2
• DOI: https://doi.org/10.1017/beq.2016.77
• Keywords: agency theory, cautionary-tale view, bilateral agency, asymmetric information, reciprocity
• Public URL: https://nottingham-repository.worktribe.com/output/843696
• Publisher URL: https://www.cambridge.org/core/journals/business-ethics-quarterly/article/problem-of-unilateralism-in-agency-theory-towards-a-bilateral-formulation/42E4187594F7E37BB4EA743458632DF1
• Contract Date: Feb 9, 2017