Principals, Agents and the Economics of Accountability in the New Public Sector

Abstract

Examines the recent changes made to the public sector in the UK in the context of relevant economic models, including the principal‐agent model, public goods theory and the median voter model. Considers a number of possible justifications for the changes, including the emulation of the private sector as a model of accountability and efficiency, and increasing the accountability of the public sector. Finds major problems with each of these justifications, highlights other possible explanations for the changes, and emphasizes the importance of the concept of “residual loss” when monitoring and bonding processes are imperfect.

Web-Based Accountability Practices in Non-profit Organizations: The Case of National Museums

“…Their activity is oriented towards the interests of the Thus, there is a sort of ''social contract'' that links the museum and the community (Mayston 1993;Edson and Dean 1996;Lord and Lord 1991;Ambrose and Paine 1993). The community enters into a contract with an expert in managing a specific type of heritage (artistic, archaeological, etc.).…”

“…Donors are considered the better proxy for the main principal, the community (Mayston 1993). Thus, grants and donations are seen as implicit judgments about the degree to which a museum has satisfied cultural demands (Reiss 2000).…”

CEO Emoluments Determination of Non Governmental Organisations (NGO) in Melaka: A Concept Paper

“…Principal-agent relationship model has been widely use in evaluate management of profit-orientated organisation (Mayston, 1993). The model was developed by Jensen and Meckling (1976) presents the most influential framework that transforms the principal-agent relationship.…”

Budgeting and governing for deficit reduction in the UK public sector: act three ‘accountability and audit arrangements’

“…It illustrates how central government have shifted from centralized top-down accountability arrangements for local government performance (using the Audit Commission) towards an ostensibly bottom-up approach based on data transparency and direct contact with citizens. This is important because it has implications for what data is visible and to whom (Hopwood, 1984) and therefore changes the relationship between the organisation that is held to account (the "agent") and the actor on whose behalf it operates (the "principal") (Mayston, 1993). Notably however, central government has retained its hierarchical control over financial conformance, since local authorities are still required to deliver statutory services and set balanced budgets -despite significant cuts in their funding -7 and the National Audit Office has taken on responsibility for this, as well as more generally assessing value for money in local public services.…”

“…In the local government context, this "community" should be interpreted as local residents -the "principal" who are served by the "agent" (the council) in Mayston's (1993) terms. This suggests that residents should be given access to relevant information about their council's activity and performance, as well as the opportunity to initiate changes through the ballot box if this information indicates poor performance, financial incompetence or a lack of effective governance.…”