Implications of Indian Philosophy and Mind Management for Agency Conflicts and Leadership: A Conceptual Framework

Abstract

The unceasing stream of corporate scams and financial misdemeanours establish that agency conflicts are a stark reality of the contractual relationship between principals and agents. Agency theory identifies four sources of agency conflicts at the leadership level: moral hazard, earnings retention, risk aversion and time horizon. The theory proposes an outcome- and/or behaviour oriented mitigating mechanism based on agency costs. However, as the real-world evidence shows, these mechanisms have been only partially effective. In this context, the present study conducts a diagnosis of agency conflicts at the leadership level, trying to understand its origin, sources, mitigating mechanism and its limitations. The paper then takes a novel approach for bridging the gap between the current state of conflicts and the desired state of absence from conflicts, by examining Indian philosophical systems. It identifies the characteristics of Indian philosophy rooted in the Vedic wisdom as integrative, holistic, stressing on a direct experience of vision of the truth, emphasising practicality, and promoting the goal of self-realization through mind management. The paper then leverages the pithy aphorisms (sutras) from Indian philosophical texts to develop a mind management framework as a tool to mitigate agency conflicts.