The Agency Vortex: Why Top Management is Full of Self-Interested People

Research Summary: The authors argue that managers’ agentic behavior can be traced to a managerial selection process that favors individuals with high need for social dominance, creating an “agency vortex” that results in top managers being prone to act in their own interests. The authors discuss the implications of their theory for fundamental issues in strategy, highlighting the importance of firm heterogeneity in the management selection process, and the research opportunities these present. Managerial Summary: The two most commonly used means of reducing agency costs are governance mechanisms that monitor and control management behavior and training and development programs that foster loyalty to the firm. Based on empirical findings from social psychology and strategy the authors argue for a new way of approaching the agency problem. Rather than monitoring the behavior of those who make it to the top, and trying to align their motives and actions with those of the organization, the managerial selection process should be rethought in favor of people who are less likely to put their own interests ahead of the organization’s.