Controversy Over the Agency Theory

Business -- Annotated Bibliography Drucker, P.E. (1994,). The theory of business. Harvard Business Review, September-October. Retrieved from http://www.mindz.com/images/Ronaldvandenhoff/file/the_theory_of_business_drucker.pdf Credibility: Author Analysis Peter Drucker was the Clarke Professor of Social Science and management at the Claremont Graduate School in Claremont, California. The university has named the Drucker Management Center in his honor. This article was the thirty-first article for Harvard Business Review.

Business students across the globe know Drucker's seminal work in business theory as it plays a prominent role in business school curricula. Credibility: Intended Audience The intended audience for this article is executives in the C-suite -- particularly chief executive officers (CEOs). This article is a call to action pointed at business executive and directors who are equipped to influence business thought leadership. Credibility: Findings Drucker cites many actual businesses in his argument for addressing the obsolescence of business theories.

Content Summary Drucker presents four specifications for a valid theory of business: 1) "The assumptions about environment, mission, and core competencies must fit reality;" 2) "The assumptions in all three areas have to fit one another;: 3) "The theory of all business must be known and understood throughout the organization;" and 4) "The theory of the business has to be tested constantly" (Drucker, 1994). From this, Drucker articulates his theory that business theories are "human artifacts" that don't last long, eventually become "obsolete and then invalid" (Drucker, 1994).

Just as Kubler-Ross identified the stages of grief, Drucker claims that organizations caught up in the current of obsolescence go through definitive, recognizable stages. First, assuming a defensive position, they pretend nothing is happening, then they attempt to patch things up. Drucker argues that preventive care, early diagnosis, and rethinking the theory -- followed by action -- will help align the organization with the new realities posed by the changed environment.

Application This article highlighted the importance of conducting periodic environmental scans, rather than assuming that relevant factors will remain static over the long-term. Heath, J. (2009). The uses and abuses of agency theory. Business Ethics Quarterly, 19(4), 497-528. Retrieved from http://www.pdcnet.org/pdc/bvdb.nsf/purchase-openform&fp=beq&id=beq_2009_0019_0004_0497_0528 Credibility: Author Analysis Joseph Heath is the Director of the Centre for Ethics, professor in the Department of Philosophy, and School of Public Policy and Governance, all at the University of Toronto. Dr.

Heath is a Fellow for the Trudeau Foundation, the author of many books -- both academic and popular, and has written hundreds of scholarly articles. His work is related to critical social theory in the tradition of the Frankfurt School, which practices close engagement with the social sciences that rejects value-neutrality. His most recent academic book is Morality, Competition and the Firm, which was published by Oxford University Press in August 2014. Credibility: Intended Audience The intended audience includes academics in the field of business management, finance, marketing, and ethics.

The audience also includes executive officers and directors of corporations who are part of the decision-making mechanism, shareholders and investors, legislators, judges, and attorneys. Credibility: Findings The article serves as a qualified defense of agency theory with Heath's argument stemming partly from the mistaken interpretations of the theory. A corpus of articles exist that deal with the controversy of teaching agency theory in business schools and applying the theory in practice in corporation -- an association often made with the spate of corporate scandals, bankruptcies, and global fiscal meltdown.

Content Summary Heath addresses.