The paper "The Role of Agency Theory as a Contributory Factor to the Crisis" is a great example of a literature review on management. In 2007, the lives of people all over the world were affected by the global economic crisis. Millions of individuals lost their life savings and mortgages as years of unethical practices in the US financial sector finally caught up with the perpetrators. In this paper, I argue that the management crisis precipitating the near-global collapse of the financial system referred to as the Global financial crisis was a consequence of the propagation of faulty management theory.
Among these management theories that are at the center of this crisis include Agency theory. According to Ghoshal (2005), the central assumption of Agency theory that an organization exists to maximize shareholder value remains intact although the agency has been called into question by other dominant managerial ideologies. Ghoshal (2005) analyzes agency theory and links it to the Global financial crisis accusing its dominance in management education and practice as the root cause of the global financial crisis. This paper seeks to analyze the role of agency theory as a contributory factor to the crisis.
The paper starts with an analysis of the agency theory and its underlying assumption. Secondly, it critically analyzes agency theory by using literature that has reviewed and assessed the agency theory, noting various gaps in the theory as dominant management thought. Thirdly, the paper presents organizational theory and stewardship theory as alternative theories that can help organizations overcome the shortcomings of the agency theory. Further, the paper gives the possible implication of the literature reviewed in the study and practice of management in the future.
Unlike, Ghoshal (2005) who advocates for a radical change of the management curricula, the paper concludes that Agency theory should be integrated with other theories of management to purge the theory to practice gaps noted in the theory.
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