Agency theory, not financial economics, legitimized executive stock-option compensation

Evidence

It certainly was not the only factor. A different area of economics, agency theory, was the main academic source of legitimacy for a crucial aspect of the change, the greatly increased proportion of corporate executives’ rewards that came in the form of stock and stock options. — Donald MacKenzie, An Engine, Not a Camera, 1174

Categorization

• XREF: Distinguishes two performativity channels — finance theory (market value) vs. agency theory (executive pay) — useful for the reader’s mapping of the field. — connects to: The $1 million deductibility cap unexpectedly inflated executive pay via options. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 55; Stock-based executive pay widened CEO-worker income gaps. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 56; Efficient-markets and random-walk theory legitimized options against their scandalous reputation. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 62 (+2 more)
• DEFINE: Separates agency theory from financial economics proper as distinct legitimacy sources for corporate change.

Broader Connections

• Efficient-markets and random-walk theory legitimized options against their scandalous reputation. #corroborates (0.85) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 62
• The Black-Scholes model legitimized options trading by rebutting gambling stigma #contradicts (0.78) — Donald MacKenzie, An Engine, Not a Camera, 703
• Corporate outsourcing and CEO pay inflation stem from neoliberal theory, not efficiency #corroborates (0.72) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 175