Military Management and the Agency Problem Agency theory can be helpful for understanding any organizational conflict or behavior, and applies equally as well to the private and public sector. Applied to the military organization, agency theory "offers insight into how military strategies relate to political objectives," an important consideration (Petrina, 2005, p. v). When it is applied to the corporate world, agency theory also offers insight into how executive decisions are made and how executives can become corrupt when they possess significant power and separation from agents or shareholders. There are differences in corporate versus military governance and organizational culture, but those differences to do not cloud over the essential applicability of agency theory to both the private and public sector.

A traditional view of agency theory as it applies to military organizations is that "civilians set oversight measures to monitor the behavior of the military and the military responds based on the probability of its behavior being discovered and its expectation of punishment from civilian leadership," (Petrina, 2005, p. v.). Civilian leadership is defined in part as agents in the federal government including both the executive and the legislative branches, and to a lesser degree the judicial branch. A hierarchal organizational structure...

Things become more complicated when the concept of agency theory is expanded outward from the federal government to reveal that the actual agents are the citizens of the United States. Military leadership is not up for public election, but congressional and presidential leadership absolutely is, making the military indirectly accountable to the public. At the same time, the military's role in protecting national security means that its operations are by definition not necessarily public knowledge and so communication and decision making occur without public oversight.
The agency problem in the military may work its way out in different ways depending on the situation. Occasionally principals may turn directly to the President and senior advisors, as in major national security crises. The intimate relationship between military and executive branch is more open to problems than the more formalized and bureaucratic relationship that typically exists with Congressional oversight (Petrina, 2005). In some ways, military leaders or principals are even more accountable to the agents than in the corporate world due to formalized chains of command. Some, but not all, corporations have formalized chains…