Abstract:
The principal agent problem revolves around the competing interest between shareholders and the employees. The organization focus is on maximizing shareholder wealth, while employees try to obtain the maximum benefits for themselves. As per the motivational theories, people have different types of needs. Therefore, management should focus on a wide range of factors to motivate the employees to work to their full potential in the interest of the organization. The study focuses on both employee and the management of a state bank. The organization is always eager to minimize the cost and maximize the profit. Game Theory was used to provide a mathematical framework for understanding the optimal outcome and what the tradeoffs are to achieve that outcome. The objective is to find the right balance between financial gains and employee satisfaction. To fulfill that objective, one needs to evaluate the benefits given to employees, the effectiveness of those benefits on employees and finally recommend an effective benefits allocation mix to the organization, which will address both employee and the top management of the bank.
