Description: This collection examines the forces, both external and internal, that lead corporations to behave efficiently and to create wealth. Corporations vest control rights in shareholders, the author argues, because they are the constituency that bear business risk and therefore have the appropriate incentives to maximize corporate value. Assigning control to any other group would be tantamount to allowing that group to play poker with someone else's money, and would create inefficiencies.
Brief description: Michael C. Jensen is Jesse Isidor Straus Professor of Business Administration, Emeritus, Harvard Business School.
Review Quotes: The book provides the fundamental building blocks for agency theory and discusses a wide variety of topics, including the nature of man, the theory of the firm, specific and general knowledge, organizational structure, executive compensation and performance measurement. These essays, which span the past 25 years, illustrate how Jensen's views have evolved and expanded over time... Jensen's integrated theory is a noble attempt to combine economic analysis of markets and behavioral organization theorists' understanding of the internal aspects of organizations.--J. Barkley Rosser "Journal of Economic Behavior and Organization"