Whistleblower

Principal-Agent Theory Applied to Whistleblower Case

Britte Earp

Capella University

August 6, 2013

Abstract

Principal-Agent Theory Applied to Whistleblower Case

The principal-agent theory of public administration is based upon contracts, whether physical or mental contracts. Under this theory, generally within public administration, the principal is the public and the agent is the employee of the government. In recent years, however, the public sector has pushed towards outsourcing many services previously provided by government. The outsourcing of these jobs and services has led to contracting between government and private sector companies. While the principal-agent theory is not the optimal theory to describe public administration, it is very useful in describing the relationship between government and private sector companies involved in performing this work and duties. By contracting with private sector, the governmental entity becomes the principal and the company is the agent. The contract between the two is the real contract but also the contract with the public trust. As this shows, the principal-agent theory does explain the interaction between the private company and the governmental entity providing the contract and ultimately the money for the contracted work.

In the case of the whistleblower, John Jack, involved in the case of American Eagle, John Jack found that the contract between the two had broken down. The agent was not providing the necessary work promised through the contract. The agent, American Eagle, not only let down the government but ultimately let down the American people or the public by not fulfilling the terms of the contract but still taking the money to do the job. In revealing this to the public, John Jack lost his job but he also had the duty to do so because he as an agent of his company had to fulfill the contract needs.

An efficient and equitable allocation of resources, fiscal transparency...