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

Pouryousefi, Sareh and Frooman, Jeff (2017) The problem of unilateralism in agency theory: towards a bilateral formulation. Business Ethics Quarterly, 27 (2). pp. 163-182. ISSN 2153-3326

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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.

Item Type: Article
Keywords: agency theory, cautionary-tale view, bilateral agency, asymmetric information, reciprocity
Schools/Departments: University of Nottingham, UK > Faculty of Social Sciences > Nottingham University Business School
Identification Number: 10.1017/beq.2016.77
Depositing User: Howis, Jennifer
Date Deposited: 09 Feb 2017 09:39
Last Modified: 09 Jul 2017 11:43
URI: http://eprints.nottingham.ac.uk/id/eprint/40438

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