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EVA and Corporate Governance: Stimulating Agency Capitalism in the New Economy

The working relationship between capitalist principals and their operational agents is undergoing radical changes mainly as a result of the fragmentation of equity owners and their physical remoteness from the firm’s nerve centres. Exacerbating this mutation is the liquefaction of the physical asset-based old economy into the knowledge-based new economy. This Paper is an attempt to explore the origins and contours of capitalism, in particular, the firm, the entrepreneur, agency theory, motivation and value creation. It attempts to discover the triggers that stimulate employee capitalism in this new business/economic paradigm. This serves as the setting for the Paper’s central thrust, namely the factoring in of EVA (Economic Value Added) and Governance considerations as possible motivators and overseers, respectively, of this emerging reality. EVA’s almost total obsession with the ‘motivation-capital protection-value growth’ equation may be acting as a distracting block in integrating other fundamental non-quantitative capitalism stimulating initiatives. The Paper suggests instances in furtherance of its claims and considers EVA as yet not having reached its academic and professional milieu and thus still faces a learning curve to attain maturity and full potentiality.