NGO Accountability & Legitimacy: Principal-Agent Theory & Case Studies

[00:00:00]in this lecture we look at accountability and legitimacy strategies with particular reference to principal agent theory and the case studies of the united states and china principal agent theory is often utilized in international relations literature to study the relationship between states and international organizations nevertheless we can apply principal agent theory to explain state and ngo relations states act as principles that provide a temporary transfer of authority to ngos as agents states delegate authority to ngos in order to deliver public services including relief and developmental aid due to their perceived expertise and efficiency the question we need to ask ourselves is as follows why do principles the states in this example delegate to ngos as their agents what mechanisms do states use to try and control ngos and to control mechanisms utilized by states limit and geoautonomy applying principle agent theory we can contend that the most important control mechanism that states have over ngos is the power of the purse where principals can threaten to withhold funding from ngos that do not act in accordance with their expectations in addition states control ngos by utilizing specific mechanisms such as earmarking and coordination which acts to reduce ngo's autonomy and compels them to act in ways that differ from their principles through earmarking a principle can dictate how and where aid will be used oftentimes principles through earmarking can control a delivery down to the region state or or even a specific project which limits the pro the sort of programming and geographical autonomy of ngos ngos that accept funding from states are exposed to a marketization of ngo activities which includes the use of competitive tenders and renewable contracts marketization has resulted in ngos having to compete for contracts often in the short term this causes ngos to distort information about success and failure of their activities it can lead ngos to engage in behavior that is contrary to their normative agendas furthermore when ngos are subjected to competitive and renewable contracts they respond similarly to as non-pro as for-profit organizations namely would they have concerns of securing funds outweighing other concerns including ethics project um efficiency or or self-criticism principles attempt to control agents particularly in the areas of financing undermine ngo's ethical and normative objectives and limit their autonomy when we adopt a principal agent approach we can also articulate this idea that ngo dependence on government funding may make the organizations less likely to work in poorly governed states the dependence of ngos as an agent on funding from governments as principles may actually influence ngo's aid allocation decisions since continued funding from donors is often contingent on house successfully particular ngo is deemed to be by the donor ngos may be more likely to allocate aid in less difficult environments in order to ensure that their projects will be successful while we have emphasized how principles utilize control mechanisms that act to limit ngo's autonomy some other scholars may argue that ngos do have agency and they can't influence principles central to principal agency theory is the idea that the preferences of principals and agents are hardly ever perfectly aligned and that agents will try to pursue their private interests principles develop control mechanisms in order to constrain opportunistic agency behavior but such control devices are typically imperfect resources are scarce and principles never dedicate sufficient time or effort to control agents entirely therefore agents always possess a certain margin for autonomous action agents can become actors and utilize strategies to gain autonomy we were suggesting here is that ngos have power in their relationship with principles that they can utilize to maintain their autonomy ngos have specialized expertise that principles like states need and ngo's ability to exploit this information gives them power ngos can gain autonomy as a result of also having multiple principles for example states international organizations individual donors having multiple principles give ngos more power by allowing them to exploit the differences among them which allows them to utilize the rules of the principles that best matches the interests of the ngos ngos do have agency independent of states which they define as the ability to choose among different courses of action to learn from previous experience and to affect change for example ngos have agency in issues of issue definition and agenda setting as a result ngos can play an important role in issue framing in order to convince states to alter their positions angels also demonstrate agency from states as a result of their adi to ideational sort of methods of influence in which they pursue normative change by refaring problems as global rather than the sole interests of states we can suggest there are two strategies in particular that ngos can utilize to pursue their private interests and increase their autonomy in their relationship with principals the first is at the project level in which ngos attempt to stop or change the conditions of a particular project in this scenario ngos will accept a contract from a principal to carry out a specific project and attempt to halt or change the conditions of the project once contracted the second level of influence occurs at the policy making level principals often give ngos as a sort of an advisory role and invite them to participate in project and program reviews in which ngos can provide advice and policy recommendations the two strategies here often overlap with ngos first accepting the funding from a principal to actually carry out the project which in turn leads to a debate within the ngo about the principal policies resulting within the ngo engaging with the principal to better understand how accountability and legitimacy you know plays out in practice we're going to look at two case studies the first case study is looking at the us case and then we're going to follow this up with this case of china so first the u.s case since its creation in 1961 the united states agency for international development and relief usaid has relied on ngos to deliver u.s foreign aid in order to to promote development and relief programs abroad this relationship was reinforced in 1973 with the passage of the new directions mandate which called for usaid to provide ngos with financial assistance in order to broaden their overseas developmental activities in 1981 the relationship between ngos and usaid was further strengthened when congress passed legislation requiring that at least 13.5 percent of the government expenditure for development and relief activities be channeled through ngos in recent years usaid has gone beyond this by allocating over 30 percent of its total budget to ngos now it's really interesting how to become eligible for usaid funding to do so ngos must first register with the government and to maintain their status they must submit a number of documents every year including annual reports annual budget audited financial statements internal revenue service documents as well as a report indicating that the us ngo receives at least 20 percent of its income from private sources this is mandated by congress the us has delegated authority to ngos for development and relief aid distribution due to ngo's perceived strengths one of the primary reasons is due to their ability to reach the poorest and neatest recipients or we could call them hidden populations the us government also utilizes ngos as agents since they are perceived to be cost effective due to their lar their sort of lack of large bureaucracies which is often common in government aid agencies and this can act to slow or hamper aid delivery additionally u.s delegates to ngos mainly because of their years of experience and level of expertise in developmental and relief work as discussed principal agent theory indicates that principles implement a number of control mechanisms in order to govern agent behavior and usaid's relationship with ngos is no different there are three primary ways in which usaid as principle attempts to control ngos as agents that act to limit ngo's autonomy including the power of or the power 2 withdraw funds of funding mechanisms earmarking and political restrictions evidence indicate that usaid has threatened to withdraw funds from ngos that refuse to cooperate with specific usaid directors that often reflect political rather than practical concerns in addition usaid has a number of funding mechanisms that vary in regards to the level of autonomy they afford ngos usaid uses three mechanisms to deliver foreign assistance funds to ngos including contracts grants and cooperative agreements contracts are usually awarded competitively in order to provide goods and services meeting usaid conditions and they require heavy usaid involvement in program design and implementation grants are also usually awarded competitively however on my contract ngos are are free to implement a program independently of usaid involvement cooperative agreements are also usually awarded competitively and they tend to represent a middle ground between contracts and grants they require limited usaid involvement in program and design and implementation such as the right for usaid to approve the work plan and the hiring for essential personnel which is less usaid involvement required by a contract but more involvement than is required with a grant in addition usaid often funds unsolicited ngo proposals which allows ngos to design assistance programs relatively independently within wider parameters usaid also controls ngos through earmarking funds error marking allows usaid to dictate where and how assistance will be used by identifying regions states operations or projects that qualify for uscid funding providing with the us with the opportunity to pursue its foreign policy interests usaid often earmarks funds to states that are deemed important to u.s security rather than to states that in the most need this acts to limit ngo's autonomy both in a programming sort of fashion and a geographical fashion in addition to determining where aid goes usaid also places restrictions on where ngos can go as a result of political considerations this was quite prevalent during the cold war where the us government did not allow ngos that receive federal subsidies to work in cuba or vietnam or north korea due to their sort of political regime type control mechanisms implemented by the u.s government could act to confirm worse fears regarding the autonomy of state-funded ngos the relationship between state funders and ngos is typically hegemonic with state-funded ngos becoming implementers of state policy states compel ngos to act in ways that counter their principles due to the fact that states fund ngos to further their foreign policy goals although states might support an ngo as a donor states as principles through earmarking or other control mechanisms discussed here effectively limit ngo's programming and geographical autonomy the use of ngos as agents by states acts to reduce ngo autonomy and results in the ngos acting on behalf of state foreign policy interests now if the united states is successful at controlling and limiting ngo's autonomy we would expect u.s funded ngos developmental activities to reflect u.s foreign policy interests the increased dependence of ngos and state funders has led many to question if the organizations have become the mere implementers of the policy agendas of their state funders in fact the former executive director of oxime america notes the problems that dependence on government contracts and grants can create for ngos so joseph short argues groups which have contracted with the us government for a long time or who have received a large percentage of their budget from the us government have a government mentality they think as the government does before we delve further into our second case the case of china it is necessary to establish the sort of principle concepts we are addressing so we're looking at accountability and transparency accountability is a ngos liability to its primary stakeholders for the guarantee of its performance while the term accountability has been widely explored in research transparency has not received similar attention although transparency is widely used much of the literature falsely assumes a prior knowledge of the term however the world bank defines transparency in the following manner the increased flow of timely and reliable economic social and political information it incorporates the following elements access comprehensiveness relevance quality and reliability while the notion of accountability and good governance of an organization is still relatively new for many ngos in china there is marked distinction between local ngos and ingo's behavior and practices this difference can largely be attributed to the experiences of international ngos working in various nations that in addition draw extensively on the discourse of good government's practices chinese ngos while achieving some success in servicing the needs of their communities may have some organizational foundations that can be questionable while growing individual activism has led to an increased growth of chinese ngos studies conducted by myself and others have suggested that the motivation behind the increase of chinese ngos can often been related to personal gains and interests and not only community ones therefore for many chinese ngos issues of transparency or democratic decision making is not well considered in the organizational foundation moreover when an organization is going to be accountable or not is directly related to its transparency levels for example when we interviewed some ngos one representative in particular belief that if the resources were generated from within the organization then it would not be necessary to be transparent about how the organization operates itself for other interviewees amongst chinese ngos the acquainted accountability with that of trust and honesty there seemed to be a consensus amongst chinese ngos we interviewed that accountability should not be an issue because honesty and trust are the basis of ngo's work to begin with while trust and honesty are crucial factors to a better relationship with constituents it may be a bit naive to believe that the issue of accountability rests on these two characteristics let alone they are immediately granted by virtue of being seen as an ngo throughout many of the interviews and numerous studies we've also found that several chinese ngos responsible for the care of their constituents did not perceive them as having the right to the best available service in fact many ngos in the social welfare sector were far from providing the best available care for its clients we found that despite the core the sort of poor quality of care given to patients or clients in such places such as homes for the mentally disabled or we found that parents or or guardians were afraid to complain in case this may affect the treatment of their loved ones seemingly there appears to be an unequal relationship between the service deliverer i.e the chinese ngo and the recipients of the service this relationship may be seen as one that is hierarchical where the chinese ngo wields considerable power and restrained apprehension amongst their constituents at core this situation may have developed due to the shaky individualistic foundations of many chinese ngos to which the founding of chinese ngos is often the result of the work of one individual which leads to questions of collective benefit the role of the general public in keeping ngos accountable has taken on many different forms methods have included community procurement where communities hold procurement rights or directly manage the money to buy collective services and goods another option is for a participatory budget design and monitoring mechanism where communities make choices on public investment allocations and monitor expenditures in general the perception of the general public on on ngo's activities have been mostly positive this is notably the case where ngos are seen as working in the community to address social needs and problems in the near future however in order for the general public to take on a greater sort of accountability sort of mechanism is to have the media as a partner so there should be greater future partnerships between the public and the media as a way to monitor the activities of ngos one of the greatest weaknesses that ngos face globally is its governing system and thus when we look at how to improve the activities of ngos there are three things in particular we can point to the first is an accountable board of directors we must contemplate the composition the objectivity and the effectiveness of a board of directors where there has to be individuals who are experienced and who are not operationally tied to the ngo in so far that they are perhaps the executive director or individuals um working on a daily basis with the ngo who are part and the majority of the war of directors a second sort of idea to improve the activities of ngos is to understand the strategic planning strategic planning allows the organization's mission and goals to be attained through the implementation of projects both in the short and long terms generally speaking many ngos fail because they do not have a stringent strategic plan and and as follows they do not hire the right personnel or try to acquire the best resources to work towards their specific goals outlined in the strategic plan the third prong to improve the activities of ngos globally is trying to understand their stakeholder involvement uh sort of procedures stakeholder inclusion is a process it is more than just their participation but involves an ngo's ability to effectively communicate their operations their goals within the community at large in which they're operating and to their greater stakeholders this concludes our lecture on accountability and legitimacy in our next lecture we'll turn our attention to the advocacy strategies of ngos