LOOKING AT HRM THROUGH THE LENS OF AGENCY THEORY – ARE SUBOPTIMAL HRM PRACTICES A CONSEQUENCE OF MORAL HAZARD?

Abstract

The aim of the paper is to provide theoretical evidence that agency problems do exist and could cause under-performance in the HRM area, but as well to systematize and elaborate HRM control systems which reduce agents’ moral hazard in general, and especially when making HRM decisions. A substantial quantity of the literature indirectly connected to the field, as focused literature on the agency theory implications for HRM so far is scarce, is analysed. The organisation of the existing knowledge in the following areas is provided: (1) introduction to agency problem and moral hazard, (2) agency problems related to managing employees, (3) HRM control mechanisms for managing agents, and (4) HRM control mechanisms for reducing agents’ suboptimal HRM decisions.

Keywords

• agency problem
• agency theory
• hrm control mechanisms
• hrm decisions
• human resource management (hrm)
• moral hazard