Stewards, Agents, and the Founder Discount: Executive Compensation in New Ventures

Academy of Management Journal, 2006

38 Pages Posted: 13 Nov 2005

See all articles by Noam Wasserman

Noam Wasserman

University of Southern California - Lloyd Greif Center for Entrepreneurial Studies

Abstract

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

Wasserman, Noam, Stewards, Agents, and the Founder Discount: Executive Compensation in New Ventures. Academy of Management Journal, 2006. Available at SSRN: https://ssrn.com/abstract=843506

Noam Wasserman (Contact Author)

University of Southern California - Lloyd Greif Center for Entrepreneurial Studies ( email )

United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
491
Abstract Views
3,281
rank
59,798
PlumX Metrics