Showing papers on "Principal (commercial law) published in 1987"

Agent and Principal

Abstract: In most general terms, agency theory focusses on cooperation in the presence of external effects as well as asymmetric information. To have a look on external effects first, consider two individuals. One of them, the agent, is decision making. He is thus affecting his own welfare and, in addition, that of the other individual called principal. These external effects of the agent’s decisions or actions are negative: modifications of the agent’s action which are preferred by the principal yield disutilities to the agent. A common example is a situation where the principal is assisted by the agent and the agent is deciding on level and kind of his effort. The principal is thus ready to pay some kind of reward to the agent in return for a certain decision/action/effort.

Agency and the organization of health care delivery.

Abstract: Recent developments in the theory of agency--the relationship that arises e when a principal delegates authority to an agent--offer powerful insights into the organization of health care delivery systems. In this paper we first provide an overview of the agency literature and then illustrate how relationships between doctors, patients, and hospitals can be explored within an agency framework. We find that not only the evolution of standard fee-for-service relationships but also the emergence of HMOs can be analyzed as responses to uncertainty and to difficulties in writing complete, enforceable contracts. These findings have broad implications for health policy and suggest a variety of strategies for addressing agency issues.

Lochner's Legacy

Abstract: The received wisdom is that Lochner was wrong because it involved “judicial activism”: an illegitimate intrusion by the courts into a realm properly reserved to the political branches of government. This view has spawned an enormous literature and takes various forms. The basic understanding has been endorsed by the Court in many cases taking the lesson of the Lochner period to be the need for judicial deference to legislative enactments. The principal purpose of this essay, descriptive in character, is to understand Lochner from a different point of view. For the Lochner Court, neutrality, understood in a particular way, was a constitutional requirement. The key concepts here are threefold: government inaction, the existing distribution of wealth and entitlements, and the baseline set by the common law. Governmental intervention was constitutionally troublesome, whereas inaction was not; and both neutrality and inaction were defined as respect for the behavior of private actors pursuant to the common law, in light of the existing distribution of wealth and entitlements. Whether there was a departure from the requirement of neutrality, in short, depended on whether the government had altered the common law distribution of entitlements. Market ordering under the common law was understood to be a part of nature rather than a legal construct, and it formed the baseline from which to measure the constitutionally critical lines that distinguished action from inaction and neutrality from impermissible partisanship. This understanding of the Lochner period is faithful to what the Court said when it both engaged in and abandoned Lochner-like reasoning, and it points to an important element in the Lochner Court's approach, one that has little to do with an aggressive judicial role in general.

Lochner's Legacy

Abstract: The received wisdom is that Lochner was wrong because it involved “judicial activism”: an illegitimate intrusion by the courts into a realm properly reserved to the political branches of government. This view has spawned an enormous literature and takes various forms. The basic understanding has been endorsed by the Court in many cases taking the lesson of the Lochner period to be the need for judicial deference to legislative enactments. The principal purpose of this essay, descriptive in character, is to understand Lochner from a different point of view. For the Lochner Court, neutrality, understood in a particular way, was a constitutional requirement. The key concepts here are threefold: government inaction, the existing distribution of wealth and entitlements, and the baseline set by the common law. Governmental intervention was constitutionally troublesome, whereas inaction was not; and both neutrality and inaction were defined as respect for the behavior of private actors pursuant to the common law, in light of the existing distribution of wealth and entitlements. Whether there was a departure from the requirement of neutrality, in short, depended on whether the government had altered the common law distribution of entitlements. Market ordering under the common law was understood to be a part of nature rather than a legal construct, and it formed the baseline from which to measure the constitutionally critical lines that distinguished action from inaction and neutrality from impermissible partisanship. This understanding of the Lochner period is faithful to what the Court said when it both engaged in and abandoned Lochner-like reasoning, and it points to an important element in the Lochner Court's approach, one that has little to do with an aggressive judicial role in general.

Auditing in an Agency Setting

Abstract: Agency theory is concerned with contracts which lead to optimal incentives and risk-sharing. The purpose of this paper is to examine the influence of auditing on both aspects, when audits are performed (i) by an owner of a firm (who is a principal) and (ii) by an auditor in order to motivate the firm’s manager (who are both agents). We especially ask, under what conditions the owner can expect truthful financial reporting from the manager and a truthful report by the auditor. We further ask, whether it is likely to expect coalitions of the manager and the auditor against the owner. Since all results are gained in one-period agency models with at most two agents, the stability of results and the practical relevance of the models are discussed. Though the models, up to now, have no decision-supporting function they tell us that coalition-forming of agents against the principal seems to be likely if there are no other factors which are neglected in agency theory so far.

The Politics of Equality in Constitutional Law: The Equal Protection Clause, Dr. Du Bois, and Charles Hamilton Houston

Abstract: The principal accomplishment of John Marshall's Supreme Court, according to George Lee Haskins and Herbert A. Johnson, was to subject politics to the discipline of law.1 In the system Marshall helped mold, ordinary politics may lie behind the adoption of constitutional provisions, but once placed in the Constitution, the provisions take on a meaning independent of politics. The rhetoric of discourse is transformed as arguments over principles replace arguments over interests.2 An alternative view of politics and constitutional law remains available even as we acknowledge Marshall's achievement. In the alternative view, constitutional provisions are verbal formulations that could gain substantial agreement while fundamental questions of principle remained unresolved. Politics is the craft of accommodating principled disagreements within a broader framework of agreement, and of developing acceptable compromises on issues when interests conflict. In the alternative view, politics is always present in constitutional law. Both principles and interests shape its formulations and reformulations. Constitutional law is especially political, in that sense, when the principled disagreements reflect deep divisions within the society. In United States history questions arising from the issue of race have regularly involved precisely that sort of principled disagreement. The constitutional law of racial equality has therefore been as political as any area of law could be. Constitutional law results from the litigation of contested cases. The process of

Contract, Agency, and the Delegation of Decision Making

Abstract: Contract and Agency are viewed as separable patterns for structuring transactions in the process of the division of labor. Whereas ‘contract’ refers to a concept of discrete exchange with unrevealed individual choices, ‘agency’ relates to a concept of delegation of choice, and hence an explicit treatment of the rules of choice and preference formation. In this view agency is not a special case of a theory of contract incentives with interchangeable partners, but a concept of incentives to align the agent’s preference sets and future choices with that of a principal. In consequence, behavioral aspects like trust, loyalty, opportunism (which are irrelevant in the pure pattern of contract) are central in the concept of agency. The patterns of contract and agency overlap to a large degree in the real world. An agency relationship may be based on a contract, and a contract may contain agency features (“relational”, “expanded”, “idiosyncratic” contracting). For purposes of analysis, however, the properties and boundaries of the two patterns should be observed.

Agency Costs are not a “Flop”!

Abstract: The following comment on the paper by Dieter Schneider in this volume only deals with his critique of the agency cost approach. He considers the agency cost approach to be “a flop”. It is demonstrated that his fundamental objection, i.e. that agency costs and, in particular, the “residual loss” are not measurable, does not justify this scathing verdict. In general the role of measurability of costs depends on how the cost concept is used. Therefore, Schneider’s views of the explanatory function and the pragmatic function of the agency cost concept are analyzed. As his notion of explanation seems to be too restrictive and as his understanding of how the agency cost concept should help to solve the principal’s problem is inadequate, his harsh critique of the entire approach has to be rejected. The concept of agency costs may be “metaphorical”, but that does not reduce its value as a theoretical tool.

The Convention Establishing the Multilateral Investment Guarantee Agency

Abstract: WITHOUT going into the details of the origins of the Convention establishing the Multilateral Investment Guarantee Agency, it suffices to say that the present Convention, which reflects the aspirations of many investors in developed countries, is primarily the outcome of the initiative of Clausen and Shihata, the present president and vice-president respectively of the World Bank. Although present bilateral treaty arrangements between investors and host countries, and customary international law concerning contractual obligations afford protection to private foreign investors, protection by multilateral arrangement would be much more reassuring for investors. In view of its wealth of experience and aims and objectives, only the International Bank for Reconstruction and Development (the World Bank) is appropriate to initiate such a convention. The draft Convention, adopted by a resolution of the Governors of the World Bank on 11 October 1985, will come into force upon its ratification by five Category One countries and 15 Category Two countries, provided that these countries subscribe to at least one-third of the capital of the Multilateral Investment Guarantee Agency (MIGA).1 The principal office of the Agency will be in Washington DC unless the Council of Governors of the Agency decides by special majority to establish it in another location.

Tort Liability and Risk Management

Abstract: During the past decade, many have questioned the propriety of the doctrine of sovereign immunity; numerous legal challenges and legislative changes have eroded the doctrine in most states. Following the 1979 modification of sovereign immunity legislation in Pennsylvania, the number of tort claims and lawsuits against the Department of Transportation has grown rapidly. In response, a study was made of the principal highway condition factors associated with tort legal actions and of the department's risk management. The results of that study are presented herein. Given the pervasiveness of the highway tort liability problem, many state transportation departments should benefit from the study findings and their implications.

Contemporary Challenges to Humanitarian Law

Abstract: ventions of 1949: they develop the law relating to the protection of victims and codify and develop the law governing the conduct of hostilities. Opposition to the Protocols has principally been directed against the provisions regulating guerrilla warfare, particularly in wars of 'national liberation', and those outlawing the use of reprisals against the civilian population. These two treaties, the most recent written development of the general rules of humanitarian law, are the fruit of almost ten years of negotiations and of a consensus obtained for the first time with the active participation of the Third World and the representatives of all civilizations, ideologies and cultures. At the price of a little compromise, the universality of humanitarian law was preserved. These days, when wars are frequently fought thousands of miles away from home base, when big and medium powers have a military presence all over the planet, a common and universal understanding and acceptance of humanitarian law is of increased importance. This essential universality is now being undermined by the negative attitude towards Additional Protocol I of a very small but crucial number of States, in particular the United States. 2. Nature and Purpose of International Humanitarian Law International humanitarian law, the law of realism and of the lesser evil has, and always has had, as its principal objective the limiting of the ill-effects of war once it has broken

The Emergence of Specific Performance as a Major Remedy in Quebec Law

Abstract: In this article, the author examines Specific Performance as a remedy for the breach of contractual obligations in Quebec law and applauds recent jurisprudential developments that have applied it as a principal recourse for creditors seeking to enforce even positive contractual obligations to do. These emerging jurisprudential trends are examined in light of historical and comparative perspectives, including the influence of the Common Law in this area, as well as in light of underlying contract theory and traditional arguments often asserted against the remedy.