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Agency Theory Framework explains the relationship between two parties in an organisation where one party, known as the principal, delegates work and decision-making authority to another party, known as the agent. In Human Resource Management, the theory is used to understand employment relationships, managerial control, motivation, performance evaluation, and conflicts arising between employees and employers. The concept of Agency Theory was developed mainly by economists Michael C. Jensen and William H. Meckling, who explained that organisations operate through contracts between owners and managers. The principal provides resources and expects the agent to act in the principal’s best interests. However, because both parties may have different goals, conflicts can arise. This situation is known as the agency problem. _________ ________ __________ __________ ____ __________ __________ ________.
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