Introduction

Overview of Agency Theory:

The base concept behind Agency Theory is very simple. It is the study of the relationship
between a person (the principal) another person (the agent) who they contract to act on their
behalf. If this contract is not created in a fashion that aligns the interests of both parties it is
likely that the agent will interpret the contract in ways that maximise their own reward, possibly
to the detriment of the principal. An overview of agency theory is given on table 1.

When a public administrator is called agent, or a public organization an agency, the

image invoked refers to one of the most basic relationships found in modern society. The modern
agency relationship allows free, but interdependent individuals to serve one another in an
economically and socially specialized society. In modern societies, it is not difficult to view the
administrative establishment as a collectivity of specialized agents and agencies acting on behalf
of the public in conducting its business.
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In public sector, the principal is usually conceived as the entire citizenry acting as a
collective public. The agents are constituted as public administrators who act through
organizations called agencies and third parties are those individuals or groups subject to
administrative action.

Moral theory:
They refer to this technique as moral discourse and describe the public managers as
having passed through two stages of moral development to a third stage. In the first stage, the
managers are initially committed to neutral rational action which results in effective government;
yet they find significant impediments to efficient and economical administration. The managers
feel a moral obligation to make things work so that there will be effective government. In the
second stage, public managers, to make things work, involve themselves deeply in the mediation
of conflicting communal values such as economic development on the one hand and
environmental protection on the other. They shape the present in a manner informed by the past
but with an eye to the future.
According to Kass, the moral crisis of role reversal is resolved if the public administrator
is willing to take ethical responsibility for significant intervention in both policymaking and
policy implementation. In such circumstances, public administrators must have a moral
framework that enables them to articulate a complex ordering of moral claims that are
compatible with our constitutional system of government.
Governing Special Norms:
1st: Fiduciary Norm: insures that the agent will make an ethical commitment to achieve the
principals welfare. A theoretical logic about agency in general that permitted the generation of
theory in a wide variety of social contexts. In other words, it actually began developing an
institutional theory of agency .
2nd: Agent Integrity: With this, the principal must not only respect the agents right to refrain
from unjust acts on its behalf, but must not require the agent to perform unjust acts in the first
place. In this way both principal and agent are bound by a universal justice norm which ethically
constrains them from pursuing principals interest that results in injustice to third parties.

The impact of Agency Theory on Contemporary ethics in public Administration

Objective:
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To formulate an ethical code that apply to all American public administrators.

Though the committee had no conscious intention of drafting an ethical code framed in terms of
the agency theory, the concept of agency shows itself present at nearly every point in their final
product.
For example, the Code routinely addresses public administrators in terms squarely rooted in
agency, public servant, professional, trustee, and so on. Far more importantly, the Code
and its Guidelines articulate, operationalize and enforce the three key norms upon which agency
ethics are based: fiduciary responsibility, agent integrity and universal justice. Hence with,
agency norms exercise a great force in shaping the American public administrators ethical
thought and practice.
Two ways/outlooks of agency as ethical theory:
1. As a theory capable of enabling genuine ethical action in public administration.
2. As an ethical theory which is capable of application in the American political system.

Agency as an Enabling Basis for ethical action

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This is a normative system and a complex set of rules/ethical rules: fiduciary, agent
integrity and universal justice norms. Thus, public administrators must feel obligated to
observe the norms of agency and public organizations must be willing to enforce this
obligation, if agency rules are to have an effect on administrative conduct.

Limitations on the impact of agency on ethical action:

1. Agency norms are subject to idiosyncratic interpretation in terms of an administrators
personal ethics and an agencys unique culture.
2. Agency norms are situation ally applied. As a result, they may either conflict with one
another or conflict with other ethical precepts espoused by the individuals or
organizations involved.

Problems with employing Agency Theory in the American Political System

1. The Limited ethical roles the public agent plays in the traditional Wilsonian model of
public administration.
2. The interposition of organizational culture and values between the public agent and the
public as principal
3. The lack of viable concept of the public interest in American politics.
4. Public agency is normally undertaken in large, complex organizations
5. The atrophied sense of the public and public interest that currently characterizes
American political life.
It is extremely important to recognize that the literal unavailability of an operational concept of
the general public in the American political system strikes at the legitimacy of many commonly
used or recently suggested social images for public administrators.
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