Stewards, Agents, and the Founder Discount: Executive Compensation in New Ventures
Academy of Management Journal, 2006
38 Pages Posted: 13 Nov 2005
Agency theory suggests that the interests of opportunistic, self-interested agents will conflict with those of principals. Stewardship theory suggests instead that executives' interests will be aligned with company interests and executives thus be more intrinsically motivated than predicted by agency theory. This study develops hypotheses regarding the psychological and situational factors that affect the applicability of each theory to executive compensation. Hypotheses are tested using a unique dataset of 1,238 executives from 528 private companies. Results suggest significant differences between founder-stewards and non-founder agents that diminish with company growth, and significant effects of equity ownership and outside rounds of financing.
Keywords: Executive Compensation, Founders, New Ventures, Entrepreneurship, Top Management Teams, Stewardship Theory, Agency Theory, Power
JEL Classification: M13 ,J33, M52
Suggested Citation: Suggested Citation