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7
What is principal-agent (P-A) Theory
The Foundations of P-A Theory
The principal-agent (P-A) relationships and problems revolve around
accountability. The economic theory of P-A relationships developed from the need
to understand the role and behavioral implications of imperfect information on
participants in a contractual relationship (Jensen and Meckling, 1976). Nobel Prize
winning Economist Kenneth Arrow (1985) in his work The Economics of Agency
stated that agency problems occur when the authority is delegated by the principal to
the agent and the welfare of the principal is affected by the choices of the agent. A
principal is defined as having the authority to delegate authority to an agent, reward
or remove an agent. An agent is charged by the principal to carry out a task delegated
to them by the principal. The employer-employee relationship is the most commonly
referenced example of a P-A relationship.
P-A Theory Applied to Education
The five types of accountability problems in educational P-A relationships
are: 1) adverse selection, 2) divergent objectives, 3) information asymmetry, 4) weak
incentives, and 5) limited decision rights problems (Hentschke and Wohlstetter,
2004). Adverse Selection is when principals lack complete information about the
abilities and values of agents and select agents who are not the best choice.
Divergent Objectives problems occur when agents pursue their own interests at the
expense of the goals of the principal; a misalignment of goals of the agent with the
principal. The role of information noted by Pratt and Zeckhauser (1985) and Arrow
Object Description
| Title | Organizational relationships in supplemental educational services (SES) and SES-type programs |
| Author | Tan, Thomas Anthony |
| Author email | diandtom@sbcglobal.net; thomas_tan@jusd.k12.ca.us |
| Degree | Doctor of Education |
| Document type | Dissertation |
| Degree program | Education (Leadership) |
| School | Rossier School of Education |
| Date defended/completed | 2008-08-07 |
| Date submitted | 2008 |
| Restricted until | Unrestricted |
| Date published | 2008-10-08 |
| Advisor (committee chair) | Hentschke, Guilbert C. |
| Advisor (committee member) |
Datnow, Amanda Mafi, Gabriela |
| Abstract | The Center for Education Policy (CEP, 2007) released a July 2007 NCLB report examining the effectiveness of assistance to schools that have been unable to achieve state defined student Proficiency goals for two consecutive years. This academic tutoring assistance known as Supplemental Educational Services (SES) was deemed to be important or very important by less than 10% of the districts surveyed.; How can we explain differences in outside of the school day academic tutoring programs that are mandated (SES programs under NCLB) and those that are willingly provided (SES-type programs by schools)? These differences in programs can be studied and understood through what economists call "principal-agent" theory to study the relationships among the participants. The principal-agent (P-A) theory had its origins in the study of the problems that arise when objectives of a principal and agent diverge. The purpose of the study is to understand the P-A related performance problems among the participants in Supplemental Educational Services (SES). This study will examine the P-A organizational relationships within the three primary SES and SES-type school program elements – individualized instruction, provider accountability, and student participation. The three research questions that were developed to guide this study are: 1. How does the principal-agent relationship explain what instructional strategies and practices are used by SES and SES-type providers in out of school hours programs? 2. How does the principal-agent relationship explain how SES and SES-type providers are accountable for student learning? 3. How does the principal-agent relationship explain how SES and SES-type providers manage student participation?; In comparing SES and SES-type after school tutoring organizations, data analysis revealed that principal-agent problems in Title I schools required to provide SES were greater than those Title I SES-type schools that willingly provided after school tutoring. The six major findings of this study found principal-agent problems in the areas of SES organizational barriers, beliefs in tutoring effectiveness, sub optimization of SES, non-performance based competition among SES providers, and relationships among parents, tutors, and educators.; Recommendations for successful SES implementation and improvement of current practice to address these principal-agent problems included increasing the outreach to parents, using an SES provider report card to rank provider performance, improved sharing of existing student data between school districts and SES providers, expanding the pool of students who could benefit from SES tutoring, and improving communications and coordination through an SES provider-school district advisory council. Suggestions for future research include comparing SES implementations in coastal vs. inland California school districts, study of student motivation in after school tutoring, greater cooperation between SES providers and school districts, and the effectiveness of comprehensive vs. academic after school tutoring. |
| Keyword | principal; agent; education; elementary; k12; nclb; supplemental; educational; services; SES; tutoring |
| Geographic subject (state) | California |
| Coverage date | 2007/2008 |
| Language | English |
| Part of collection | University of Southern California dissertations and theses |
| Publisher (of the original version) | University of Southern California |
| Place of publication (of the original version) | Los Angeles, California |
| Publisher (of the digital version) | University of Southern California. Libraries |
| Provenance | Electronically uploaded by the author |
| Type | texts |
| Legacy record ID | usctheses-m1643 |
| Contributing entity | University of Southern California |
| Rights | Tan, Thomas Anthony |
| Repository name | Libraries, University of Southern California |
| Repository address | Los Angeles, California |
| Repository email | cisadmin@lib.usc.edu |
| Filename | etd-Tan-2371 |
| Archival file | uscthesesreloadpub_Volume26/etd-Tan-2371.pdf |
Description
| Title | Page 13 |
| Contributing entity | University of Southern California |
| Repository email | cisadmin@lib.usc.edu |
| Full text | 7 What is principal-agent (P-A) Theory The Foundations of P-A Theory The principal-agent (P-A) relationships and problems revolve around accountability. The economic theory of P-A relationships developed from the need to understand the role and behavioral implications of imperfect information on participants in a contractual relationship (Jensen and Meckling, 1976). Nobel Prize winning Economist Kenneth Arrow (1985) in his work The Economics of Agency stated that agency problems occur when the authority is delegated by the principal to the agent and the welfare of the principal is affected by the choices of the agent. A principal is defined as having the authority to delegate authority to an agent, reward or remove an agent. An agent is charged by the principal to carry out a task delegated to them by the principal. The employer-employee relationship is the most commonly referenced example of a P-A relationship. P-A Theory Applied to Education The five types of accountability problems in educational P-A relationships are: 1) adverse selection, 2) divergent objectives, 3) information asymmetry, 4) weak incentives, and 5) limited decision rights problems (Hentschke and Wohlstetter, 2004). Adverse Selection is when principals lack complete information about the abilities and values of agents and select agents who are not the best choice. Divergent Objectives problems occur when agents pursue their own interests at the expense of the goals of the principal; a misalignment of goals of the agent with the principal. The role of information noted by Pratt and Zeckhauser (1985) and Arrow |
