Toward An Affect Based View of Principal–Agent Dynamics.

This article examines the role of affect—emotions and interpersonal feelings—in principal-agent relationships within corporate governance, specifically focusing on interactions between CEOs and boards of directors. It argues that traditional agency theory, which emphasizes self-interest and economic incentives, overlooks how affect shapes trust, loyalty, and cooperation, thereby influencing governance outcomes in ways that can both mitigate and exacerbate agency costs. The authors propose an affect-based perspective that integrates behavioral and social theories, highlighting how positive affect can enhance collaboration and information sharing, while strong affective bonds may also lead to conflicts of interest or manipulation. This framework calls for further research into how affective dynamics evolve over time and impact monitoring, decision-making, and organizational performance in governance contexts.