TITLE:
Relevance of Kautilya’s Insights to Corporate Governance and Management
AUTHORS:
Balbir S. Sihag
KEYWORDS:
Agency Costs, Principals’ Costs, Accountability-Authority Trade-Off, Culture of Grabbing and Suspicion, Corporate-Governance, Ethical Surplus
JOURNAL NAME:
Theoretical Economics Letters,
Vol.7 No.5,
July
19,
2017
ABSTRACT: There is a separation between owners and managers in
a corporation. Managers, being utility maximizer, are likely to shirk and enjoy
expensive perks. In the literature, these are termed as agency costs, conflicts
of interest or moral hazard problem. Current approaches suggest legalistic
measures to mitigate this problem. Kautilya’s conceptual framework is presented
that not just mitigates, but eliminates this problem altogether. Secondly, it
is shown that the current organizational structure, a relic of the past
industrial economy, for corporate-governance and management is sub-optimal.
Thirdly, Kautilya’s suggestion to hire three or four full time experts to
enhance efficiency and creativity, which are essential to survival and growth
of a business in today’s increasingly knowledge-based economy, is presented.