Principal-Agent Theory and the Open Method of Co-ordination: The case of the European Employment Strategy

Abstract

This paper adapts and then uses principal–agent (PA) theory to conceptualize and thereafter to analyse the EU-level development of the Open Method of Co-ordination (OMC), a crucial component of the Lisbon Strategy as a ‘governance architecture’. The PA model theorizes the continuous interaction and power struggle between the Commission (‘agent’) and the member states (‘principal’) in the emergence and institutionalization of the OMC. It is innovative for several reasons: first, it acknowledges that the member states and Commission interact in a PA logic prior to a contractual agreement; second, it recognizes that the ‘principal’ does not only control and monitor the ‘agent’, but also (re-)defines features of the OMC via political initiatives; third, it underlines the importance of the ideational action of the ‘agent’. On the basis of the model, two hypotheses are formulated: first, that the ‘agent’ will be more influential in defining the OMC when it is nascent; and second, that the ‘principal’ will be more influential in the reconfiguration of the OMC. The model is tested and the hypotheses are confirmed via a longitudinal analysis (1992 to 2005) of the OMC in employment policy.