Trust Versus Opportunism: Striking the Balance in Executive Search

Abstract

This article exemplifies the principal-agent problem by reference to executive search consultancy The client company (principal) hires an executive search consultancy (agent) to recruit on its behalf Inherent in the relationship is the possibility of opportunistic behaviour: The effort expended by the agent on behalf of the principal cannot be monitored and the principal cannot judge whether sufficient effort has been expended. To overcome this, incentive systems based on outputs rather than behaviour would have been advocated. In the service sector; however, there is the added problem that often output itself’ is difficult to define and monitor: By taking a non-standard view this article considers the incentive systems that have evolved in executive search.