Agency Theory and Corporate Governance in the Brazilian Public Service: A Theoretical Analysis

Abstract

The Brazilian public service is governed by laws and regulations, which sometimes lead to a divergence of interests between the service provider and the contracting entity. Agency theory states that the delegation of powers to administrators who may not have any equity stake in the organization creates a separation between ownership and control. This situation results in a misalignment of interests between the owners, known as principals, and the hired managers, known as agents. The role of Corporate Governance is to oversee the relationship between management (agents) and owners (principals) and reduce the existing differences, particularly regarding information asymmetry. This paper, through a theoretical essay, aims to present the relationships established in the literature regarding Agency Theory and Corporate Governance in the context of the public sector and services. In this context, a robust Governance structure becomes essential for effective administration and management in public organizations. It is evident that the principles of Corporate Governance, such as Transparency (disclosure), Accountability, and Fairness, align with the principles of Public Administration, particularly in terms of Publicity and Morality.