Author(s)

Balbir S. Sihag

Professor Emeritus of Economics, University of Massachusetts Lowell, Lowell, MA, USA.

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.

Agency Costs, Principals’ Costs, Accountability-Authority Trade-Off, Culture of Grabbing and Suspicion, Corporate-Governance, Ethical Surplus

Sihag, B. (2017) Relevance of Kautilya’s Insights to Corporate Governance and Management. Theoretical Economics Letters, 7, 1121-1133. doi: 10.4236/tel.2017.75076.