The principal's moral hazard: Constraints on the use of incentives in hierarchy

• 成果类型: Article
• 署名作者: Miller, Gary J.; Whitford, Andrew B.
• 署名单位: Washington University (WUSTL); University System of Georgia; University of Georgia
• 刊物名称: JOURNAL OF PUBLIC ADMINISTRATION RESEARCH AND THEORY
• ISSN/ISSBN: 1053-1858
• DOI: 10.1093/jopart/mul004
• 发表日期: 2007
• 页码: 213-233
• 关键词: employee stock-ownership; Agency theory; sales-force; COMPENSATION; performance; INFORMATION; plans

摘要

Pure incentive schemes rely on the agent's self-interest, rather than more coercive control, to motivate subordinates. Yet most organizations, and in particular public agencies, rely very little on pure incentive contracts and instead use coercive mechanisms of monitoring and sanctioning that many theorists find objectionable. We use principal-agency theory to investigate the problem. Principal-agency theory has tacitly assumed throughout that it is in the principal's interests to find a set of incentives that induce efficient levels of effort from the agent. We show that this is not necessarily the case. We identify a problem we denote as the principal's moral hazard constraint in which bonuses large enough to produce the efficient incentive effect are prohibitively expensive for the principal. Potential solutions to this problem-involving penalization or joint ownership-are unavailable in the public sphere. This means that for a large class of control problems in agencies, the principal's self-interest will result in the inefficient use of monitoring and oversight rather than outcome-contingent incentives. Although monitoring is often thought of as resulting from the agent's moral hazard, it can just as reasonably be seen as resulting from the principal's moral hazard.