nconsistency at the heart of the system, for a system that has rules requiring agents to look out for others while encouraging individuals to look out only for themselves, destroys the practice of looking out for others" (p. 61).
Agency theory accepts that employees and employers have diverse ends, behave in a self-interested way, and are eager to presume altering points of risk. In this paper, a review of how incentive remuneration plans can help create a commonality of interest between the two groups is examined.
The agency theory presumes that the agent and the principal are self-interested and try to make the most of their gains in their relationship. A simple instance is the case of a store manager who acts as an agent of the owner. The store manager desires for as much rewards for his work as possible that too for as little work as feasible. But at the same time the store owner would look for the manager to work the maximum for a very little pay as possible. This premise drops the themes of honesty and commitment from the agency association as their inappropriateness with the basic theory of balanced maximization. According to DeGeorge (1992) “The job of agency theory is to help devise techniques for describing the conflict inherent in the principal-agent relationship and controlling the situations so that the agent, acting out of self-interest, does as little harm as possible to the principal’s interest”.
Organisations have from a very long time made use of incentives as a means for adjusting the involvements of managers and of employees with the interests of the firm and its shareholders. For instance, in the 1980s, CEO Roger Smith brought in operation dependent pay to the line workers at GM. Thus when GM was doing well, the workers also was doing well (Business Week, 1900).
One primary anxiety for managers who want to stimulate their workers is how to allocate financial motivators among team members(Ramaswami & Singh, 2003). Particularly,