Kenneth W.  Abbott, Philipp Genschel, Duncan Snidal, and Bernhard Zangl (Eds), (2020), Oxford University Press, 301 pages

While not directly targeted at regulators, The Governor’s Dilemma: Indirect Governance Beyond Principals and Agents is of interest to an audience of regulatory practitioners, managers, and scholars. The book, edited by Professor Kenneth Abbott (Arizona State University) and colleagues shines a fresh light on the challenges that regulators (agencies and individuals) experience in involving external parties (‘regulatory intermediaries’) in the regulatory process. It also shines a fresh light on the challenges that regulators themselves experience as delegated parties in the policy process.

The gist of the book is that for too long we have conceptualised the relationship between regulators and intermediaries, and the relationship between politicians/policymakers and regulatory agencies as a principal-agent relationship. In a classical regulatory principal-agent relationship, the principal grants authority to an agent to regulate on its behalf. This could include the development, implementation, and enforcement of regulation.

To illustrate, regulatory agencies are often delegated authority by Parliament to regulate. For instance, the Land Transport Management Act, the Land transport Act, and the Railways Act all give regulatory powers to NZTA. Regulatory agencies themselves can delegate authority to carry out specific regulatory tasks to external parties, as is for instance the case with WOF inspectors.

Typically, the principal (which Abott et al. term ‘governor’) is interested in involving agents because it lacks the expertise or operational capacity to regulate, or the principal lacks the credibility or legitimacy to do so. Agents (which Abott et al. term ‘intermediaries’) have these competencies.

Traditional principal-agent thinking holds that governors seek to keep their intermediaries in check by putting in place ex ante controls in the form of contracts and agreements, and ex post controls in form of monitoring and enforcement of its intermediaries.

Yet, so explain Abbott et al., governors face a dilemma when involving intermediaries: “competent intermediaries pose significant threats to the governor. The governor depends on intermediaries to achieve its goals; this dependence creates a power asymmetry that undermines control” (p.7). The more competent the intermediary, the more power they have over the governor. The governor can, however, not simply increase its control measures as this will undermine the competencies of its intermediaries.

Thus, the governor’s dilemma boils down to finding a balance between attracting competence without losing control.

Abott et al. introduce three relationships other than traditional delegation that may help governors to overcome this dilemma. In a trusteeship the governor grants authority to an intermediary but allows the intermediary substantial authority over its exercise of discretion. In cooption the governor enlists the intermediary but maintains strong control over how the intermediary use their competencies. Finally, under orchestration the “governor engages an intermediary, on a voluntary basis, to pursue shared governance goals” (p. 15).

The main difference between the competence-control theory proposed by Abbott et al. and traditional principal-agent theory is that the former allows for different forms of mobilization of intermediaries: granting authority to an intermediary and enlisting authority from an intermediary. Competence-control theory further distinguishes between traditional top-down control (central to principal-agent theory) and non-hierarchical control.

The essays that follow Abbott et al.’s theoretical introduction all explore the value of the competence-control theory through in-depth, empirical studies of real-world examples of delegation, trusteeship, cooptation, and orchestration—including examples of regulatory practice.

The book is of relevance for managers at regulatory agencies involved in the outsourcing of regulatory tasks to intermediaries. It provides hands on lesson on how to balance the competence-control tradeoff.

The book is of relevance also to the top-brass of regulatory agencies. It helps them to better understand how their governors (politicians and policymakers) seek to control their conduct and that of their agencies, and how they can use their competencies best to ensure that such control does not become harmful to their mission.

Disclaimer

In these brief book reviews, I discuss classic and contemporary books that make up the canon of regulatory scholarship. I focus on their central guiding idea or core notions and aim to keep the reviews to around 500 words. Unfortunately, this implies I must sacrifice a considerable amount of detail from the books reviewed.