Which of the following focuses on how employee compensation can be used to align the divergent interests and goals of an organizations' various stakeholders?

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Question restatement: Which of the following focuses on how employee compensation can be used to align the divergent interests and goals of an organization's various stakeholders?

Option 1: expectancy theory. This theory centers on how employees' beliefs about the likelihood of effort leading to performance and then to rewards influence motivation. It does not specifically address aligning multiple stakeholders’ interests through compensation structures.

Option 2: agency theory. This theory examines the relationship between principals (owners or stakeholders) and agents (managers) and how to design contracts and compensation to align the agents’ interests with those of the principals, reducing information asymmetry and moral hazard. It directly concerns using compensation to align disparate stakeholder goals.

Option 3: intrinsic motivation. Intrinsic motivation refers to performing an activity for internal satisfaction rather than external rewards. While important for behavior, it does not focus on the design of compensation to reconcile stakeholder interests.

Option 4: Thorndike's law of effect. This principle states that behaviors followed by satisfying consequences are likely to be repeated. Although related to reinforcement, it is a general behavioral principle and does not specifically address aligning stakeholder interests through compensation schemes in organizations.

In summary, among the options, agency theory is the framework that explicitly discusses using compensation to align the interests of different stakeholders by shaping contracts and incentives to mitigate principal–agent problems and align objectives.

Which of the following focuses on how employee compensation can be used to align the divergent interests and goals of an organizations' various stakeholders?

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