HomeDLSU Business & Economics Reviewvol. 25 no. 2 (2016)

Principal-Agent Compensation Practices in a Stakeholder-Oriented Smokey Mountain Cooperative

Paz Esperanza T. Poblador



While developing the operations manual of three eco-laundry shops established by a Smokey Mountain cooperative, I discovered an alarming disparity in salary schemes among the social enterprises.  Cooperatives in the Philippines embody the values of stakeholdership in that they balance the needs of all stakeholders to increase social performance.  But in this case, principalagent compensation practices were implemented towards increasing profitability.  A discussion on compensation and organizational rewards allows for further understanding of the process in which these compensation packages were developed by the decision-makers.  After using the survey method, measurable business indicators were evaluated to distinguish the effects of profitability, productivity, customer loyalty, and service quality on compensation.  This study will show that leaders in this case did not uphold stakeholder values congruent with cooperatives, but instead implemented performance controls at the expense of more hardworking employees.  A proposed compensation scheme which could be seen as more equitable by all employees is then discussed.