Preludes to the Principal-Agent Relationship: The Infrastructural Origins of Incentivized Salespeople in Banks

• In Event: 225 - Regular Session. Economic Sociology: Infrastructures for Financial Markets

Abstract

The notion that financial incentives are a crucial means of reconciling divergent interests has taken center stage in debates around the financial crisis, and it has long been fundamental to management practice. Commentators widely agree that bankers’ incentive schemes encouraged undesirable or unethical behavior such as mis-selling and overselling of financial products. Underlying explanations of incentivization is Agency Theory, which has risen to prominence in economics, political science, accounting and finance as a theory of motivation in asymmetrical information. Instead of expanding or dismissing Agency Theory, the paper looks at a certain kind of performativity (Callon 1998; MacKenzie and Millo 2003) of this non-neoclassical economic theory. Based on ethnographic fieldwork at two types of banks in pre-crisis Hungary, the paper analyzes a large universal bank’s program to move its employees’ activities “from serving to selling”, which involved bonuses for quantities sold, initially controversial among employees. The paper compares this to the baseline case of personal financial advisors in a Multi-level Marketing scheme who sold state-supported home loans purely by commission. There, financial incentives were the primary reason why people joined, yet they resisted meeting clients. The paper shows that having incentives to increase sales (as a strategy of gaining market share) required an iterative process of setting up a whole behavioral infrastructure, and an increasingly technical control of employee’s interactive work. The paper contributes an organizational underpinning of seemingly financial motivation: a data-based measurability of work and other efforts at “alignment” is what shifted banking representatives to sell.

Authors

• Zsuzsanna Vargha, University of Leicester

• Peter Lunt, University of Leicester