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Accountability in Accounting? The Politics of Private Rule‐Making in the Public Interest
Author(s) -
MATTLI WALTER,
BÜTHE TIM
Publication year - 2005
Publication title -
governance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.46
H-Index - 76
eISSN - 1468-0491
pISSN - 0952-1895
DOI - 10.1111/j.1468-0491.2005.00282.x
Subject(s) - delegation , politics , principal (computer security) , accountability , principal–agent problem , accounting , public interest , economics , public administration , private sector , law and economics , business , political science , finance , law , corporate governance , computer science , operating system
Over recent decades governments have increasingly delegated domestic and international regulatory functions to private‐sector agents. This article examines the reasons for such delegation and how private agents differ from public ones, and then analyzes the politics of regulation post delegation. It argues that the key difference between delegation to a public agent and delegation to a private one is that in the latter case a multiple‐principals problem emerges that is qualitatively different from the one usually considered in the literature. An agent's action will be determined by the relative tightness of competing principal–agent relationships. This tightness is a function of the relative importance of each principal for the agent's financial and operational viability as well as its effectiveness in rule making. Further, the article posits that exogenous changes in the macro‐political climate can deeply affect the nature of principal–agent relationships. The authors test their hypotheses about the politics of regulation in the postdelegation period through the study of accounting standards setting in the United States, a case of delegation of regulatory authority to a private agent that goes back to the New Deal era and has received renewed public attention in the wake of recent corporate financial scandals.