Agency Theory's Assumption Of Self-Interest Driven Behavior: Critique From An Islamic Perspective
Keywords:
Agency Theory, Self- Interest Driven Behaviour, Islamic PerspectiveAbstract
Agency theory has been applied in many fields of study since its introduction in 1976. It mainly states that the agency’s relationship results from the separation of ownership and management. This separation results in a conflict of interest between the owners (principals) and managers (agents). One of the main contentions of this theory is its main assumption, which states that agents and principals behave opportunistically to maximise each party’s own interest at the expense of the other. This assumption ignores the agent-principal ethical and religious beliefs that shape their attitudes and behaviours at work. This qualitative study attempts to criticise Agency Theory based on its assumption of self-interest-guided behaviour from an Islamic perspective, wherein human behaviour is guided by certain Islamic principles opposing such self-interest behaviour. This study used the literature review method to gain broad insight on issues related to Agency theory from an Islamic viewpoint. Findings indicate that Agency Theory’s main assumption of self-interest-guided behaviour contradicts Islamic Shariah and fundamental Islamic principles (tawhid, khilafah, and adalah) that shape a Muslim’s behaviour. Thus, Agency theory should incorporate Islamic ethics to maintain its relevance when explaining managerial behaviour in Muslim societies.
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Copyright (c) 2024 Talal Annakoua, Fadzila Azni Ahmad, Shahir Akram Hassan
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