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Oliver E. Williamson hypothesised (1964) that profit maximization would not be the objective of the managers of a joint stock organisation.〔(International Management Journal ), Kenny Crossan, The Theory of the Firm and Alternative Theories of Firm Behaviour: A Critique. International Journal of Applied Institutional Governance Volume 1 Issue 1; ISSN 1747-625.〕 This theory, like other managerial theories of the firm, assumes that utility maximisation is a manager’s sole objective.〔D. D. Tewari, Katar Singh (2003). Principles of Microeconomics. New Age International Publishers. pp. 92. ISBN 81-224-1017-0.〕 However it is only in a corporate form of business organisation that a self-interest seeking manager can maximise his/her own utility, since there exists a separation of ownership and control.〔H.L. Ahuja (2009). Advanced Economic Theory. S.Chand&Co. pp. 932. ISBN 81-219-0260-6.〕 The managers can use their ‘discretion’ to frame and execute policies which would maximise their own utilities rather than maximising the shareholders’ utilities. This is essentially the principal–agent problem.〔Geetika, Piyali Ghosh, Purba Roy Choudhury (2009). Managerial Economics. The McGraw-Hill Companies. pp. 50. ISBN 978-0-07-026365-9.〕 This could however threaten their job security, if a minimum level of profit is not attained by the firm to distribute among the shareholders.〔Mukund Mahajan (2008). Managerial Economics, third edition. Nirali Prakashan. pp. 10.15.〕 The basic assumptions of the model are: # Imperfect competition in the markets. # Divorce of ownership and management. # A minimum profit constraint exists for the firms to be able to pay dividends to their share holders.〔(Objectives of Firms ), SMU WordPress. MB0042-Unit-06.〕 ==Managerial utility function== The managerial utility function includes variables such as salary, job security, power, status, dominance, prestige and professional excellence of managers. Of these, salary is the only quantitative variable and thus measurable. The other variables are non-pecuniary, which are non-quantifiable. The variables expenditure on staff salary, management slack, discretionary investments can be assigned nominal values. Thus these will be used as proxy variables to measure the real or unquantifiable concepts like job security, power, status, dominance, prestige and professional excellence of managers, appearing in the managerial utility function.〔E. Narayanan Nadar, S. Vijayan (2009). Managerial Economics, eastern economy edition. PHI Learning Pvt. Ltd. pp. 42. ISBN 978-81-203-3720-6.〕 Utility function or "expense preference"〔M. L. Trivedi (2009). Managerial Economics: Theory and Applications. Tata McGraw–Hill. pp. 100. ISBN 978-0-07-043578-0.〕 of a manager can be given by: :: where ''U'' denotes the Utility function, ''S'' denotes the “monetary expenditure on the staff”, ''M'' stands for "Management Slack" and ''I''''D'' stands for amount of "Discretionary Investment". "Monetary expenditure on staff" include not only the manager's salary and other forms of monetary compensation received by him from the business firm but also the number of staff under the control of the manager as there is a close positive relationship between the number of staff and the manager's salary. "Management slack" consists of those non-essential management perquisites such as entertainment expenses, lavishly furnished offices, luxurious cars, large expense accounts, etc. which are above minimum to retain the managers in the firm. These perks, even if not provided would not make the manager quit his job, but these are incentives which enhance their prestige and status in the organisation in turn contributing to efficiency of the firm's operations. The Management Slack is also a part of the cost of production of the firm. "Discretionary investment" refers to the amount of resources left at a manager's disposal, to be able to spend at his own discretion. For example spending on latest equipment, furniture, decoration material, etc. It satisfies their ego and gives them a sense of pride. These give a boost to the manager's esteem and status in the organisation. Such investments are over and above the amount required for the survival of the firm (such as periodic replacement of the capital equipment).〔〔 抄文引用元・出典: フリー百科事典『 ウィキペディア（Wikipedia）』 ■ウィキペディアで「Williamson's model of managerial discretion」の詳細全文を読む スポンサード リンク
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