Hostname: page-component-cd9895bd7-jkksz Total loading time: 0 Render date: 2024-12-25T16:38:02.391Z Has data issue: false hasContentIssue false
  • English
  • Français

Trust, Accountability, and Sales Agents’ Dueling Loyalties

Published online by Cambridge University Press:  23 January 2015

Nancy B. Kurland
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper argues that current accountability mechanisms are inadequate to ensure that straight-commissioned agents meet their fiduciary obligations to their clients. In doing so, using agency theory, it revisits how the straight-commission compensation system creates agents’ dueling loyalties and recommends mechanisms of accountability organizations, agents, and/or clients can recognize and employ to ensure agents’ fiduciary obligations to their clients.

Type
Articles
Information
Business Ethics Quarterly , Volume 6 , Issue 3 , July 1996 , pp. 289 - 310
Copyright
Copyright © Society for Business Ethics 1996

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Alchian, A. A. & Demsetz, H. 1972. “Production, Information Costs, and Economic Organization.” American Economic Review, vol. 62, pp. 777‐95.Google Scholar
Anders, G. 1993. “More Managed Health-care Systems use Incentive Pay to Reward 'Best’ Doctors.” Wall Street Journal, January 25, p. B1.Google Scholar
Anderson, E. & Oliver, R. L. 1987. “Perspectives on Behavior-based versus Outcome-based Salesforce Control Systems.” Journal of Marketing, vol. 51 (October), pp. 76‐88.Google Scholar
Andreoni, J. & Miller, J. H. 1993. “Rational Cooperation in the Finitely Repeated Prisioner's Dilemma: Experimental Evidence.” Economic Journal, vol. 103, pp. 418, 570‐85.Google Scholar
Badaracco, J. L. & Webb, A. P. 1995. “Business Ethics: A View from the Trenches.” California Management Review, vol. 37: 2, pp. 8‐28.Google Scholar
Barber, B. 1983. The Logic and Limits of Trust. New Brunswick, NJ: Rutgers University Press.Google Scholar
Basu, A. K.Lai, R.Srinivasan, V., & Staelin, R. 1985. “Salesforce Compensation Plans: An Agency Theoretic Perspective.” Marketing Science, vol. 4: 4, pp. 267‐91.Google Scholar
Bird, F. & Waters, J. A. 1989. “The Moral Muteness of Managers.” California Management Review, vol. 32: 1.Google Scholar
Blasi, A. 1988. “Bridging Moral Cognition and Moral Action: A Critical Review of the Literature.” Psychological Bulletin, vol. 88: 1, pp. 1‐45.Google Scholar
Brief, A. P., Dukerich, J. M., & Doran, L. I. 1991. “Resolving Ethical Dilemmas in Management: Experimental Investigations of Values, Accountability, and Choice.” Journal of Applied Social Psychology, vol. 21: 5, pp. 380‐96.Google Scholar
Buell, T. Jr., 1992. “Ignorant Public Easy Prey for Shady Car Repair Shops.” The Pittsburgh Press, February 16, p. B8.Google Scholar
Chonko, L.B. & Hunt, S.D. 1985. “Ethics and Marketing Management: An Empirical Examination.” Journal of Business Research, vol. 13, pp. 339‐59.Google Scholar
Cooper, R. W. & Frank, G. L. 1991a. “Business Ethics in the Insurance Industry.” Journal of the American Society ofCLU & ChFC, May, pp. 74‐80.Google Scholar
Cooper, R. W. & Frank, G. L. 1991b. “Ethics in the Life Insurance Industry: The Issues, Helps, and Hindrances.” Journal of the American Society of CLU & ChFC, September, pp. 54‐66.Google Scholar
Cressey, D. R. & Moore, C.A. 1983. “Managerial Values and Corporate Codes of Ethics.” California Managment Review, vol. 25 (4), pp. 53‐77.Google Scholar
Davis, J. R. & Welton, R. E. 1991. “Professional Ethics: Business Students’ Perceptions.” Journal of Business Ethics, vol. 10: 6, pp. 451‐463.Google Scholar
Derry, R. 1990. “Ethics in Life Insurance Selling.” Life Insurance Selling, January, 42+.Google Scholar
Derry, R. 1993. Personal Communication.Google Scholar
Derry, R. & Halpern, J. Unpublished manuscript. An exploratory study of the relationship of compensation systems to ethical decision-making with a case study of Dun and Bradstreet, Inc. For a copy write to: Derry, R. at The University of Pennsylvania, The Wharton School, 3620 Locust Walk, Philadelphia, PA 19104.Google Scholar
Driscoll, P.A. 1994. “Sears to Link Incentives for Auto Service Sales to Customer Satisfaction.” Marketing News, vol. 28:8, (April 11), p. 8.Google Scholar
Dobson, J. 1991. “Management Reputation: An Economic Solution to the Ethics Dilemma.” Business & Society, vol. 30: 1, pp. 13‐20.CrossRefGoogle Scholar
Dubinsky, A. J., Howell, R. D., Ingram, T. N., & Bellenger, D. N. 1986. “Salesforce Socialization.” Journal of Marketing, vol. 50, pp. 192‐207.Google Scholar
Eisenberg, M. A. 1995. An Introduction to Agency and Partnership (second edition). Westbury, NY: The Foundation Press, Inc.Google Scholar
Eisenhardt, K. M. 1985. “Control: Organizational and Economic Approaches.” Management Science, vol. 31: 2, pp. 134‐149.Google Scholar
Eisenhardt, K. M. 1988. “Agency—and Institutional—Theory Explanations: The Case of Retail Sales Compensation.” Academy of Management Journal, vol. 31:3, pp. 488‐511.Google Scholar
Eisenhardt, K. M. 1989. “Agency Theory: An Assessment and Review.” Academy of Management Review, vol. 14:1, pp. 57‐74.Google Scholar
Etzioni, A. 1988. The Moral Dimension: Toward A New Economics. New York: The Free Press.Google Scholar
Fama, E. F. & Jensen, M. C. 1983. “Separation of Ownership and Control.” Journal of Law and Economics, vol. 26, pp. 301‐325.CrossRefGoogle Scholar
Finn, D. W., Chonko, L. B., & Hunt, S. D. 1988. “Ethical Problems in Public Accounting: A View from the Top.” Journal of Business Ethics, vol. 7, pp. 606‐615.Google Scholar
Gabarro, J. J. 1978. “The Development of Trust Influence and Expectations.” In Athos, A. G. & Gabarro, J. J. (eds.). Interpersonal Behavior: Communication and Understanding in Relationships. Englewood Cliffs, NJ: Prentice-Hall, pp. 290‐303.Google Scholar
Gatewood, R. D. & Carroll, A. B. 1991. “Assessment of Ethical Performance of Organization Members.” Academy of Management Review, vol. 16:4, pp. 667–690.CrossRefGoogle Scholar
Giddens, A. 1984. The Constitution of Society: Outline of the Theory of Structuration. Berkeley: University of California Press.Google Scholar
Gorlin, R. A. (ed.). 1990. Codes of Professional Responsibility, (2nd ed). Washington, D.C.: The Bureau of National Affairs.Google Scholar
Hass, W. 1993. “Truths of Commission.” Financial World, vol. 162: 2 (January 19), pp. 28‐29.Google Scholar
Hoffman, K. D., Howe, V., & Hardigree, D. W. 1991. “Ethical Dilemmas Faced in the Selling of Complex Services.” Journal of Personal Selling & Sales Management, vol. 11:4, pp. 13‐25.Google Scholar
Hynes, J. D. 1994. Agency and Partnership: Cases, Materials, and Problems (4th edition). Charlottesville, VA: Michie Co. Law Publishers.Google Scholar
Jensen, M. C. & Meckling, W. H. 1976. “Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure.” Journal of Financial Economics, vol. 3, pp. 305‐60.Google Scholar
John, G. & Weitz, B. 1989. “Salesforce Compensation: An Empirical Investigation of Factors Related to use of Salary versus Incentive Compensation.” Journal of Marketing Research, vol. XXVI, pp. 1‐14.Google Scholar
Kegan, R. 1994. In Over Our Heads: The Mental Demands of Modern Life. Boston: Harvard University Press.Google Scholar
Kerr, S. 1975. “On the Folly of Rewarding A, While Hoping for B.” Academy of Management Journal, vol. 18:4, pp. 769‐783.Google Scholar
King, C. 1990. “Derry Sorts Out Sales Ethics.” National Underwriter, August 13, 13‐14.Google Scholar
Kohlberg, L. 1981. The Psychology of Moral Development: Moral Stages and the Idea of Justice: Essays on Moral Development, (vol. 1). San Francisco: Harper & Row.Google Scholar
Kreps, D. 1990. A Course in Microeconomic Theory. Princeton, NJ: Princeton University Press.Google Scholar
Kurland, N. B. 1991. “The Ethical Implications of the Straight-Commission Compensation System—An Agency Perspective.” Journal of Business Ethics, vol. 10, pp. 757‐766.Google Scholar
Kurland, N. B. 1993. “Sales Agents and Clients: Ethics, Incentives, and a Modified Theory of Planned Behavior.” Unpublished dissertation (University of Pittsburgh, Katz Graduate School of Business, Pittsburgh, PA, 15260).Google Scholar
Kurland, N. B. 1995a. “Ethics, Incentives, and Conflicts of Interest: A Practical Solution.” Journal of Business Ethics, vol. 14:8, pp. 465‐475.Google Scholar
Kurland, N. B. 1995b. “The Unexplored Territory Linking Rewards and Ethical Behavior: A Review and a Diagnostic Model.” Business and Society, vol. 34:1, pp. 34‐50.Google Scholar
Kurland, N. B. (1996) “Sales Agents and Clients: Ethics, Incentives, and a Modified Theory of Planned Behavior.” Human Relations, vol. 49:1, pp. 51‐74.Google Scholar
Larson, A. 1992. “Network Dyads in Entrepreneurial Settings: A Study of the Governance of Exchange Relationships.” Administrative Science Quarterly, vol. 37: pp. 76‐104.Google Scholar
Mitnick, B. M. 1975a. “The Theory of Agency: The Policing ‘Paradox’ and Regulatory Behavior.” Public Choice. Winter, pp. 27‐42.Google Scholar
Mitnick, B. M. 1975b. “The Theory of Agency: The Fiduciary Norm.” Paper presented at the 1975 Annual Meeting of the American Sociological Association, San Francisco, CA.Google Scholar
Mitnick, B. M. 1976. “The Theory of Agency: A Framework.” Paper presented at the 1976 Annual Meeting of the American Sociological Association, New York, NY.Google Scholar
Mitnick, B.M. 1987. “The Theory of Agency and Organizational Analysis.” University of Pittsburgh Working Paper Series, WP-639.Google Scholar
Moe, T. 1984. “The New Economics of Organization.” American Journal of Political Science, vol. 28:4, pp. 739‐777.Google Scholar
Moorman, C., Deshpande, R., & Zaltman, G. 1993. “Factors Affecting Trust in Market Research Relationships.” Journal of Marketing, vol. 57, pp. 81‐101.Google Scholar
Nelson, J. S. 1993. “Account and Acknowledge, or Represent and Control? On Post-modern Politics and Economics of Collective Responsibility.” Acconting, Organizations, & Society, vol. 18:2, 3, pp. 207‐229.Google Scholar
Oakes, G. 1990. “The Sales Process and the Paradoxes of Trust.” Journal of Business Ethics, vol. 9:8, pp. 671‐679.Google Scholar
Patterson, G. A. 1992. “Distressed Shoppers, Disaffected Workers Prompt Stores to Alter Sales Commission.” Wall Street Journal, July 1, p. B1.Google Scholar
Patterson, G. A. 1993. “Nordstrom Inc. sets Back-Pay Accord on Suit Alleging ‘Off the Clock’ Work.” Wall Street Journal, January 1, p. A2.Google Scholar
Perrow, C. 1986. Complex Organizations: A Critical Essay (3rd edition), (Random House: New York).Google Scholar
Poser, N.S. 1988. “Chinese Wall or Emperor's New Clothes? Regulating Conflicts of Interest of Securities Firms in the U.S. and the U.K.” Michigan Yearbook of International Legal Studies (Symposium: Internationalization of the Securities Markets), vol. IX, pp. 91‐144.Google Scholar
Posner, B. Z. & Schmidt, W. H. 1984. “Values and the American Manager: An Update,” California Management Review, vol. 26:3, pp. 202‐216.Google Scholar
Rapoport, J. Gelhlbach, S. Lemeshow, S. & Teres, D. 1992. “Resource Utilitization among Intensive Care Patients.” Arch Intern Med, vol. 152 (November), 2207–2212.Google Scholar
Rest, J. 1979. Developing in Judging Moral Issues. Minneapolis: University of Minnesota Press.Google Scholar
Ring, P. S. 1994. Personal Communication.Google Scholar
Ring, P. S. & Van de Ven, A. H. 1992. “Structuring Cooperative Relationships between Organizations.” Strategic Management Journal, vol. 13, pp. 483‐498.Google Scholar
Robertson, D. C. & Anderson, E. 1993. “Control System and Task Environment effects on Ethical Judgment: An Exploratory Study of Industrial Salespeople.” Organization Science, vol. 4:4, pp. 617‐644.CrossRefGoogle Scholar
Robertson, D. C. & Ross, W. T. 1995. “Decison-Making Processes on Ethical Issues.” Business Ethics Quarterly, vol. 5:2, pp. 213‐240.Google Scholar
Rokeach, M. 1973. The Nature of Human Values. New York: The Free Press.Google Scholar
Ross, S. 1973. “The Economic Theory of Agency: The Principal's Problem.” American Economic Review, vol. 63:2, pp. 134‐139.Google Scholar
Semin, G. R. & Manstead, A. S. R. 1983. The Accountability of Conduct: A Social Psychological Analysis. New York: Academic Press (Harcourt Brace Jovanovich Publishers).Google Scholar
Shapiro, S. P. 1987. “The Social Control of Impersonal Trust.” American Sociological Review, vol. 93, pp. 623‐58.Google Scholar
Shapiro, S. 1984. Wayward Capitalists: Target of the Securities Exchange Commission. New Haven: Yale University Press.Google Scholar
Siconolfi, M. 1992. “Shearson Sets Plan to Reduce Pressure on Fledgling Brokers: American Express Unit to Pay a Guaranteed Salary to Aid in Building up Client Bases.” Wall Street Journal, October 16, p. B3B.Google Scholar
Siconolfi, M. 1993. “Prudential-Bache Inflated Partnership Payouts.” Wall Street Journal, April 8, p. C1.Google Scholar
Siconolfi, M. 1995. “NASD Plans High-Tech Overhaul to Track Broker-Discipline History.” Wall Street Journal, June 13, p. C1+.Google Scholar
Siconolfi, M. & Harlan, C. 1993. “New Phase of Prudential Inquiry Spotlights Individuals.” Wall Street Journal, November 1, C1.Google Scholar
Siconolfi, M. & Moses, J. M. 1993. “Merrill to Pay up to $30 Million to Investors to Settle SEC's Case.” Wall Street Journal, April 23, p. C1.Google Scholar
Smyth, R. C. 1986. “Financial Incentives for Salesmen.” Harvard Business Review, vol. 46, pp. 109‐117.Google Scholar
Staw, B. M. & Boettger, R. D. 1990. “Task Revision: A Neglected Form of Work Performance.” Academy of Management Journal, vol. 33:3, pp. 534‐559.CrossRefGoogle Scholar
Tetlock, P. E. 1983. “Accountability and Complexity of Thought.” Journal of Personality and Social Psychology, vol. 45, pp. 74‐83.Google Scholar
Victor, B. & Cullen, J. B. 1988. “The Organizational Bases of Ethical Work Climates.” Administrative Science Quarterly, vol. 33:1, pp. 101‐125.Google Scholar
Waldholz, M. 1992. “Doctor Practice of Self-Referrals Draws Harsh Criticism from Medical Journal.” Wall Street Journal, November 11, p. B6.Google Scholar
Wall Street Journal, 1992. “Saturn's Success Breeds Low-Pressure Copycats.” July 31, p. B1.Google Scholar
Walton, C. C. 1992. Corporate Encounters: Ethics, Law, and the Business Environment. New York: The Dryden Press.Google Scholar
Weber, J. & Green, S. 1991. “Principled Moral Reasoning: Is it a Viable Approach to Promote Ethical Integrity?” Journal of Business Ethics, vol. 10, pp. 325‐333.Google Scholar
Willing, L. 1991. “A Theory of Voluntary Recalls and Product Liability.” Southern Economic Journal, vol. 57:4, pp. 1092‐1111.Google Scholar
Wolinsky, A. 1993. “Competition in a Market for Informed Experts’ Services.” Rand Journal of Economics, vol. 24:3, pp. 380‐395.Google Scholar
Zucker, L. G. 1986. “Production of Trust: Institutional Sources of Economic Structure, 1840-1920.” Research in Organizational Behavior, vol. 8, pp. 53‐111 (JAI Press).Google Scholar