title: Barksdale Organization

text: A strict telephone usage policy was applied rigidly throughout the organization. The pager messages were encoded to prevent easy tracing of the telephones used, all of which were public telephones. When pages were returned with a phone call no names were supposed to be used, and if a name was used, the speaker was rebuked. A separate code was used for resupply signals, which involved turning the pager display upside down. When the police catch on to this method, the Barksdales start using disposable cell phones that are constantly replaced to avoid being wiretapped.


title: Barksdale Organization

text: Avon received his narcotics supply through a connection to a Dominican organization in New York and had several other options for suppliers in surrounding cities. The main supply of narcotics was separated from the rest of the organization and held in a house in Pimlico where it could be cut and divided into smaller "stashes" for distribution among the Barksdale territory. Once inside the towers, these smaller packages were moved from room to room on a regular basis, to avoid the scrutiny of police and stick-up men.


title: Barksdale Organization

text: Avon's main office was one of his front organizations, a strip club named Orlando's. It was here, behind a locked and heavily guarded door, that the drug money was counted and secured before being sent on to its ultimate destination. Avon usually conducted his business in this office, rarely venturing onto the street. The club's legal owner, Orlando Blocker, was kept away from the drugs in order to maintain the front's appearance of legitimacy for the city.


title: Barksdale Organization

text: The organization laundered its profits through various fronts, including a funeral parlor, Orlando's, and a property developing company named B&B. It also invested in property, never actually using either Avon or Stringer's names on official papers. It also made campaign contributions and later bribes for assistance with development contracts.


title: Barksdale Organization

text: Avon Barksdale (played by Wood Harris) is the head of the Barksdale organization. In season one, he is the target of an investigation of a Major Case Squad after homicide detective Jimmy McNulty, who seems to be the only authoritative figure aware of his presence or his empire, reveals his identity to his superiors. Avon is feared by other drug dealing criminal organizations in Baltimore due to his ferocity.


title: Barksdale Organization

text: He is portrayed as hotheaded yet is also a shrewd and intuitive gangster. His drug empire includes the best territory in Baltimore for drug dealers. Together with his closest friend Stringer, Avon and their enforcers dominate the heroin trade in West Baltimore. Despite Stringer's attempts to move the two towards legitimacy, Avon shows little interest in leaving the drug business or West Baltimore.


title: Barksdale Organization

text: Stringer (played by Idris Elba) is Avon Barksdale's second-in-command, closest friend, and the main strategist behind coordinating their street dealing organization which he does as the main contact for all business. He also attends community college to better understand business and economics and to apply them to the drug trade. Together, Stringer and Avon operate out of a strip club where they discuss business, conduct meetings with their subordinates and launder money.


title: Barksdale Organization

text: His greatest aspiration is to transition into the legitimate business world. Aside from wholesaling drug packages, Stringer wants to enter the business world and leave the violence. In the third season Stringer is killed by Omar Little and Brother Mouzone in his own commercial building that was in development at the time.


title: Barksdale Organization

text: Shamrock was Stringer Bell's main assistant while Avon Barksdale was in prison. Stringer sounds out his loyalty by having him followed on a trip to Philadelphia to collect a package of drugs, along with Bodie Broadus. The package was not delivered correctly, but Shamrock and Bodie keep to Stringer's orders and meticulously document their progress, and Stringer is satisfied with their response.


title: Barksdale Organization

text: Stringer entrusts Shamrock with driving Bodie to dispose of the weapons used in a misguided territory war after a young child was killed by a stray bullet. Unfortunately Bodie unknowingly drops the bag of guns onto a passing barge instead of into the water. Little comes of the mistake because Bodie had already wiped the weapons clean of fingerprints.


title: Barksdale Organization

text: Stringer entrusts Shamrock with the set-up of CO Dwight Tilghman to allow Avon to exchange information about Tilghman with the prison authorities for an early parole hearing. Stringer, Shamrock and Country follow Tilghman and learn that he smuggles heroin from Butchie into the prison. Stringer has Shamrock deliver a package of tainted narcotics to Tilghman through Butchie, causing several deaths in the prison. Shamrock also plants narcotics in Tilghman's car to make sure Avon could successfully inform on Tilghman.


title: Barksdale Organization

text: By season three, Shamrock is Stringer's top assistant who oversees the technical aspects of the drug distribution to the various drug dealing crews. Shamrock oversees Stringer's organizational meetings at the funeral home and is told to keep to Robert's Rules of Order. He tries to keep minutes at the first meeting of the New Day Co-Op, a group of major Baltimore drug players; Stringer curtly reminds him that he is taking notes on a criminal conspiracy.


title: Barksdale Organization

text: Stringer uses Shamrock to insulate himself from the street; Shamrock takes phone calls on Stringer's behalf, then organizes face to face meetings at secure locations. Stringer put Shamrock in charge of overseeing Bernard in obtaining disposable cell phones used by the organization. Stringer insisted that Bernard buy a maximum of two phones from any one outlet. Once Shamrock takes over, he stops checking up on Bernard and Bernard begins to buy phones in bulk from Lester Freamon, an undercover officer in the Major Case unit investigating Stringer. Freamon is thereby able to supply the Barksdale's crew with pre-wiretapped phones.


title: Barksdale Organization

text: When Avon is paroled, Shamrock continues in his role as Stringer's assistant controlling their drug dealing through the lieutenants and crew chiefs. He is peripherally involved in Avon's turf war with Marlo Stanfield, passing messages back and forth to soldiers. Shamrock is arrested alongside Avon at the end of season three.


title: Barksdale Organization

text: Slim Charles was an enforcer hired by the Barksdales in season three when they needed muscle after the arrests of Savino, Wee-Bey and Bird and the deaths of Little Man and Stinkum. He proves himself to be capable and loyal on multiple occasions despite his lack of support. Upon Stringer Bell's death he became Avon Barksdale's second-in-command. After Avon's subsequent arrest, Slim Charles began working for Proposition Joe and the New Day Co-Op, an organization of which he eventually takes a leading role.


title: Barksdale Organization

text: Marquis "Bird" Hilton is a foul-mouthed soldier in the Barksdale crew who is involved in the brutal murder of Omar Little's boyfriend and accomplice Brandon. As revenge, Omar cooperates with the police to provide testimony that Bird killed William Gant, a state witness against D'Angelo Barksdale as a warning to others not to testify. Because the police need a witness, Omar agrees to falsely testify that he saw Bird shoot Gant with his signature gun.


title: Barksdale Organization

text: Omar further tells the police they will find Bird taking drugs (contrary to the rules of the Barksdale organization) and that they should be careful, as Bird is reckless. The arrest is made, and a ballistics report matches Bird's gun to the killing. Before the police begin interrogating Bird, Landsman takes a photo of the injuries on Bird's face so that he can't claim they were inflicted in custody.


title: Barksdale Organization

text: Bird vehemently rejects their offer to provide information on the people he works for, throwing out as many foul-mouthed insults as he can. His vulgar attitude towards his interrogators prompts Daniels to tear up the Polaroid image, and then, along with Kima and Landsman, deliver a three-man beatdown. Largely because of Omar's testimony, Bird is convicted of murder and sentenced to life imprisonment without parole by Judge Phelan.


title: Barksdale Organization

text: Wintell "Little Man" Royce was a heavyset soldier in the Barksdale crew, responsible for enforcing their regime at the Franklin Towers, mainly Tower 221. He is responsible for handing bags of cash to senator Clay Davis' aide Damien "Day Day" Price. With Wee-Bey Brice, he is involved in the shooting of "Orlando" and specifically shot Detective Greggs because he was surprised by her presence.


title: Barksdale Organization

text: Perry was a soldier in the Barksdale organization, usually seen acting as security at the funeral home they use as a base of operations. He sometimes acts as a bodyguard for Avon Barksdale. He is playing video games with Rico when Omar Little robs a Barksdale stash house he was supposed to be keeping secure. Perry is one of those arrested for weapons violations at the Barksdale safehouse.


title: Barksdale Organization

text: Savino Bratton was a soldier in the Barksdale Organization. He is involved in setting up the shooting of Detective Greggs and Orlando and is sentenced to three years imprisonment. Savino is eventually killed in season five by Omar Little.


title: Barksdale Organization

text: Anton "Stinkum" Artis was a lieutenant and enforcer in the Barksdale crew, responsible for making re-supplies from the crew's base at the Franklin Towers to their territory in the low-rise projects, known as "The Pit". He is robbed during one such delivery by stick-up man Omar Little, later taking part in the brutal killing of Omar's accomplice and boyfriend Brandon in retribution. Stinkum is set to be a central piece of the Barksdale detail's case as their investigation progressed, amassing much evidence of him performing various illegal acts.


title: Barksdale Organization

text: The police seizes the resupply from his subordinate Kevin Johnston, but allow Stinkum to go free to avoid arousing suspicion about their surveillance methods. After being promoted by Avon Barksdale to run new territory for the organization, Stinkum is killed by Omar as revenge for Brandon.


title: Barksdale Organization

text: Wee-Bey was the Barksdale organization's most trusted soldier, before being arrested in season one for multiple homicides. He becomes a connection for the crew and its members while they go through the system for lesser crimes. His family uses his trusted status in the crew to its fullest advantage and after he is arrested they attempt to carry on with dealings on the street as usual, updating him on their periodic visits to speak at the prison.


title: Barksdale Organization

text: Country was a Barksdale soldier who returned to work for the organization as soon as he was released from prison, despite being on parole. He is first seen trailing Bodie and Shamrock to Philadelphia, to make sure they follow Stringer Bell's orders. He also works with Shamrock to set up crooked prison guard Dwight Tilghman so that Avon Barksdale could inform on Tilghman to reduce his prison sentence.


title: Barksdale Organization

text: During a later turf war between Barksdale and Marlo Stanfield, Country is one of Slim Charles' few voices of experience in a team of young soldiers, until he is killed in an attempted drive-by on one of Marlo Stanfield's corners. The driver, Chipper, refuses to follow Slim's orders to wait for a signal before making a move.


title: Barksdale Organization

text: Rico was a soldier in the Barksdale organization, usually seen acting as security at the funeral home they use as a base of operations. He is playing video games with Perry when Omar Little robs a Barksdale stash house he was supposed to be keeping secure, and was involved in the subsequent shootout. He is then assigned to provide security for Poot Carr's corner because of the turf war with Marlo Stanfield. Rico is killed in a drive-by shooting by Stanfield soldier Snoop against Poot's corner.


title: Barksdale Organization

text: Tank was a Barksdale organization soldier. He was first seen working with Country checking up on newly promoted crew chief Bodie Broadus as he made a trip to collect a new package of narcotics. Later, in the third season, Tank is shown to be guarding Barksdale stash houses. Tank is killed by Kimmy from Omar Little's crew during a shootout following an abortive heist of the stash house he was guarding.


title: Barksdale Organization

text: Bernard was a mule in the Barksdale organization given the task of buying their supply of disposable mobile phones used by the entire organization every two weeks in order to not be traced. "Shamrock" insists that Bernard buy no more than two phones at any one outlet (providing receipts to prove it) using rental cars to do so each time, per Stringer Bell's cautious instructions. Bernard's nagging girlfriend "Squeak", tires of the time spent repeatedly visiting dozens of stores while she accompanied him on these outings.


title: Barksdale Organization

text: She puts Bernard in touch with an undercover Lester Freamon, who provides them with illegally re-charged phones at a lower price (and fake receipts), in actuality phones with pre-installed wiretaps. Information collected from these phones eventually brings down the Barksdale drug operations, including the arrest of Bernard and Squeak. Bernard says that he could not wait to go to jail to get away from Squeak, and does not seem to be entirely kidding.


title: Barksdale Organization

text: Cutty was a prisoner who became affiliated with the Barksdales when they needed muscle, recommended by his cellmate Wee-Bey. After Cutty's release from prison, he proves highly effective in the organization until he realizes that he is no longer willing to kill people, declaring "The game ain't in me no more". He leaves the organization on respectful terms from Avon, who later gives him money to start a boxing gym.


title: Barksdale Organization

text: Devonne is a young woman used by the Barksdale Organization as bait for Marlo Stanfield. She is first mentioned by Avon as a means to get close to Marlo Stanfield. She catches Marlo's attention in a club and he approaches her. Marlo checks that she is there with friends and declines both drinking and dancing. Instead they leave the club together. After they have sex in his car Devonne persuades him to meet her again the following day.


title: Barksdale Organization

text: Marlo phones Devonne to arrange a meeting and begins to feel suspicious. He assigns Chris Partlow to investigate Devonne. Snoop sits in the restaurant Marlo arranged to meet Devonne at and notices a Barksdale soldier buying a large quantity of food and taking it to a nearby SUV. Snoop reports in to Partlow.


title: Barksdale Organization

text: Partlow observes Devonne receiving a signal from the car figures out it is a trap. Marlo and Chris Partlow set up a night time ambush for Devonne. When she emerges from her home, Marlo shoots her once in each breast, then a third time through her mouth. Partlow assures him that the murder was necessary.


title: Barksdale Organization

text: She bears the distinction of being the only person that Marlo has personally murdered on-screen, as opposed to having Chris do it.


title: Barksdale Organization

text: Gerard was a dim Barksdale organization enforcer working under Slim Charles, though more intelligent than Sapper, who he usually works with. He is first seen guarding the front door during one of Omar Little's attempted heists. Later, Gerard, Sapper and Dennis "Cutty" Wise are charged with finding a thief in the Barksdale organization. Cutty's experience makes the task simple, and Gerard and Sapper punish the culprit with a savage beating. Gerard and Sapper are thrown out of Avon Barksdale's homecoming party when Barksdale saw them come in high.


title: Barksdale Organization

text: Gerard receives more work as the organization becomes embroiled in a turf war with Marlo Stanfield. He is almost killed in an attempted drive by where both Chipper and Country are killed, when Chipper, the driver, impatiently sets off early. Gerard and Sapper are later involved in the attempted shooting of Omar's grandmother, in violation of the Sunday truce. They are ordered by Avon Barksdale to replace a hat that they damaged in this unsanctioned action. Gerard is arrested at a Barksdale safehouse for weapons violations.


title: Barksdale Organization

text: Sapper is a young idiotic Barksdale organization enforcer working under Slim Charles. He often works with Gerard, and seems to be the dumber of the two. He is probably best remembered for enthusiastically uttering the line "like a forty-degree day!" as he misunderstands a speech from Stringer Bell. Sapper is first seen guarding the back door during an attempted heist by Omar Little. Gerard, Sapper and Dennis "Cutty" Wise were charged with finding a thief in the Barksdale organization.


title: Barksdale Organization

text: Cutty's experience made the task simple and Gerard and Sapper punished the culprit with a savage beating. Gerard and Sapper were later thrown out of Avon Barksdale's homecoming party when Barksdale saw them come in high. Gerard and Sapper are later involved in the attempted shooting of Omar Little while Omar was with his grandmother after church, in violation of the Sunday truce. They are ordered by Avon Barksdale to replace a hat that they damaged in this unsanctioned action. Sapper is incarcerated at Avon's weapon stash house at the end of season 3.


title: Barksdale Organization

text: D'Angelo Barksdale was Avon's nephew and a lieutenant in his drug dealing organization. He was mainly responsible for leading the corner boys in their street dealings and coordinating their earnings and performance. He was the main connection between the upper levels of the crew and the street kids that were selling the product. He struggles with the morality behind his trade and came close to informing on the crew because of it, only relenting because of loyalty to family ties his mother reminded him of before signing. He took the sentence and went to prison where he was killed by a hitman sent by Stringer Bell in season 2.


title: Barksdale Organization

text: "Ronnie Mo" Watkins ran the drug dealing operation in "The Pit" for the Barksdale organization before D'Angelo Barksdale. Ronnie Mo's promotion to overseeing Building 851 as a crew chief came just prior to the beginning of the series. Before the promotion, he worked with Bodie, Poot and Wallace in the low rises. Ronnie Mo is seen flirting with dancers at Avon's strip club. He is arrested by Herc, when the Barksdale investigation comes to an end, and is sentenced to fifteen years due to prior felonies.


title: Barksdale Organization

text: Bodie was a loyal drug dealer for the Barksdale organization who rose up in the ranks of the organization and was later left to run his own small independent crew after the organization fell apart. Eventually, he was forced to work for, and was subsequently killed by Marlo Stanfield's crew.


title: Barksdale Organization

text: Poot is a loyal drug dealer for the Barksdale organization, who serves brief prison time for his crimes. By the end of the series he is working at a shoe store attempting to distance himself from the game after growing tired of it and reeling from the loss of many friends.


title: Barksdale Organization

text: Sterling is a drug dealer in the low rise projects (known as "the pit") under D'Angelo Barksdale. Sterling is in charge of the crew's stash of narcotics, giving vials of drugs to the runners when needed. When Omar Little robs the crew, Sterling refuses to tell him where the stash is hidden and Omar shoots him in the kneecap. When Stringer Bell asks D'Angelo to flush out leaks in his team, D'Angelo discovers that Sterling (along with Cass) is stealing from him. He lets them off with a warning and a demotion to lookouts. When Bodie Broadus takes over "The Pit", Sterling is involved in his efforts to drive off a rival crew and is seen wielding a baseball bat alongside Bodie and Poot.


title: Barksdale Organization

text: Wallace is a 16-year-old drug dealer in the Barksdale crew's low rise projects organization, who is looking after a number of younger children in the neighborhood. He tries to leave the drug trade over guilt for his role in the death of Brandon, Omar Little's boyfriend, and he informs on the Barksdale Organization for the police. He is subsequently murdered by his friends Poot Carr and Bodie Broadus, on orders from Stringer Bell. D'Angelo Barksdale, who had befriended Wallace, grows outraged when he learns of the murder; it drives a permanent wedge between D'Angelo and Stringer, and is one of the main factors that leads D'Angelo to want to leave "the game" himself.


title: Barksdale Organization

text: Herbert De'Rodd "Puddin'" Johnson is a drug dealer in Bodie Broadus' crew in the 221 Tower building for the Barksdale organization. Puddin handles the count for Bodie and also spends time with him and Poot Carr when they are not working. In season two, Puddin is involved in a shoot out that results in the death of a nine-year-old boy. Puddin stays with Bodie after the towers are demolished.


title: Barksdale Organization

text: Kevin Johnston is a drug dealer in season one, he is first seen when Roland "Prez" Pryzbylewski, Herc, and Carver go to the 221 towers and cause a bust without backup and Prez pistol-whips Johnston, leaving him blind in one eye.


title: Barksdale Organization

text: Kevin is later tailed by the police with Stinkum on their way to the low rise pit to drop four G packs of dope for D'Angelo's crew, Kevin jumps out of the car with the bag of drugs and is chased by the police at the pit and is arrested. He is interrogated by Lieutenant Daniels in an attempt to get Kevin become an informant against the Barksdale drug empire. Kevin refuses to say anything, comparing the proposition to being pimped by the police. He is not seen again and presumed to being in jail on drug charges.


title: Barksdale Organization

text: Orlando acted as a front operator for the Barksdale crew and ran their strip club, Orlando's. Orlando had ambitions to get involved with the drug dealing aspect of the organization but his superiors needed him to keep a clean record for the club's licensing. He approached D'Angelo Barksdale to try to involve him in cocaine dealing but D'Angelo refused and eventually told his uncle, Avon. Avon punished the wayward frontman with a humiliating beating.


title: Barksdale Organization

text: Shardene was a dancer at Orlando's, who deliberately ignored the illegal activity in the club because she wanted to make quick money. Her first meeting with D'Angelo Barksdale did not go well, but she later agreed to go out with him. Shardene and D'Angelo moved in together after seeing each other for a few months, and it was going well until Detectives Freamon and Greggs showed her the body of Keesha, another dancer from the club.


title: Barksdale Organization

text: D'Angelo had told her the girl was taken to a hospital following an overdose at a party. In reality, she had (unbeknownst to him) been left to die, wrapped in a carpet, and dumped by Wee-Bey Brice. She felt betrayed by D'Angelo and agreed to try to help the police however she safely could.


title: Barksdale Organization

text: Shardene moved out of D'Angelo's place soon after this. Kima and Freamon wired her with a microphone, and she attempted to get close to Barksdale's conversations with little success. Frightened, Shardene begged to be allowed to stop, but Freamon persuaded her to help them determine the floorplan of the club so they could install a hidden camera in Avon Barksdale's office, which ultimately led them to catch Avon incriminating himself on video.


title: Barksdale Organization

text: Freamon and Shardene grew close during the investigation, and by season 2 they were sharing an apartment. Although she was no longer a stripper (having been encouraged by Freamon to enroll in nursing school), she was able to help put the detectives in touch with some dancers when they were investigating the deaths of girls involved in the sex trade. In Season 5, in the series' penultimate episode, Freamon hopes Shardene is awake because he is "in the mood for love" as he prepares to return home after a celebratory drinking session with Bunk. Shardene appeared in the series finale with Lester as they celebrate with other policemen the "death" of Freamon and McNulty's careers as police.


title: Barksdale Organization

text: Donette is drug lieutenant D'Angelo Barksdale's girlfriend in season 1 and is the mother of his son. Shortly after his acquittal, D'Angelo brings her to a party organized by Avon, where she first meets Stringer Bell. She often worries over her financial situation and nags D'Angelo for money. At one point, D'Angelo takes her to dinner at an upscale restaurant, and D'Angelo tries to explain his doubts about his lifestyle to her, but Donette dismisses his worries. D'Angelo begins seeing Shardene Innes behind Donette's back during the course of the season.


title: Barksdale Organization

text: Brianna Barksdale is D'Angelo's mother and Avon's sister. Brianna grew up in West Baltimore, and her family has always been involved in the drug trade. With her brother Avon controlling narcotics on the West Side, Brianna acts as an advisor, helps to manage their profits, and receives a healthy income, nice home, and new car for her efforts.


title: Barksdale Organization

text: De'Londa is the mother of Namond Brice. Namond's father Wee-Bey Brice is incarcerated for multiple homicides. Although De'Londa has adopted Wee-Bey's last name, they are not married.


title: Barksdale Organization

text: De'Londa raises her son using funds from the criminal organization Wee-Bey worked for, and she holds Wee-Bey in high regard as a male role model for Namond. She actively encourages Namond to get involved in Baltimore's drug trade and uses Wee-Bey's contacts to get him work.


title: Barksdale Organization

text: De'Londa owns her own home and spends a relatively large amount on clothes and jewelry compared to her neighbors. She ensures that Namond always wears expensive clothes even when he has misbehaved. De'Londa enjoys regular shopping trips to New York City and visits to Atlantic City while leaving Namond to care for himself.


title: Barksdale Organization

text: When Brianna Barksdale cuts De'Londa off from the Barksdale empire, De'Londa is left fuming. She decides the only way to support her way of life is to have her son work as a crew chief. She bosses one-time Barksdale lieutenant Bodie Broadus into giving Namond a package of his own and instructs Namond on how best to sell it but will not let him drop out of school for his new work.


title: Barksdale Organization

text: After De'Londa's confrontation with her son resulting in his running away, Wee-Bey, on the advice of Howard "Bunny" Colvin, insists that she let the boy go to follow his own path. De'Londa relents and the season's final episode concludes with Namond's having been unofficially adopted by the Colvin family.


title: Principal–agent problem

text: The principal–agent problem refers to the conflict in interests and priorities that arises when one person or entity (the "agent") takes actions on behalf of another person or entity (the "principal"). The problem worsens when there is a greater discrepancy of interests and information between the principal and agent, as well as when the principal lacks the means to punish the agent. The deviation from the principal's interest by the agent is called "agency costs".


title: Principal–agent problem

text: Common examples of this relationship include corporate management (agent) and shareholders (principal), elected officials (agent) and citizens (principal), or brokers (agent) and markets (buyers and sellers, principals). In all these cases, the principal has to be concerned with whether the agent is acting in the best interest of the principal. The concepts of moral hazard and conflict of interest relate to the principal-agent problem.


title: Principal–agent problem

text: The principalagent problem typically arises where the two parties have different interests and asymmetric information (the agent having more information), such that the principal cannot directly ensure that the agent is always acting in their (the principal's) best interest, particularly when activities that are useful to the principal are costly to the agent, and where elements of what the agent does are costly for the principal to observe.


title: Principal–agent problem

text: The agency problem can be intensified when an agent acts on behalf of multiple principals (see multiple principal problem). When one agent acts on behalf of multiple principals, the multiple principals have to agree on the agent's objectives, but face a collective action problem in governance, as individual principals may lobby the agent or otherwise act in their individual interests rather than in the collective interest of all principals. As a result, there may be free-riding in steering and monitoring, duplicate steering and monitoring, or conflict between principals, all leading to high autonomy for the agent. The multiple principal problem is particularly serious in the public sector, where multiple principals are common and both efficiency and democratic accountability are undermined in the absence of salient governance.


title: Principal–agent problem

text: Various mechanisms may be used to align the interests of the agent with those of the principal. In employment, employers (principal) may use piece rates/commissions, profit sharing, efficiency wages, performance measurement (including financial statements), the agent posting a bond, or the threat of termination of employment to align worker interests with their own.


title: Principal–agent problem

text: The principal's interests are expected to be pursued by the agent however, when their interests differ, a dilemma arises. The agent possesses resources such as time, information and expertise that the principal lacks. But at the same time, the principal does not have entire control over the agent's ability to act in his best interests. In this situation, the theory posits that the agent's activities are diverted from following the principal's interests and instead drive him to maximize his personal advantage. For example, in case of a dual sequence of relationships, the citizens or voters count on the politicians that they elected to fulfill their duties by structuring a system in which their healthcare and financial safety is guaranteed. Each citizen is a cog in the society machine and if everyone was overlooking the functioning of each and every entity in the system, society would never develop. However, at the same time, the minister of health cannot be overlooking each and every operation being done at the internal level of each public entity, bureaucrats are in charge of running those institutions. However when the seed of corruption is planted, the whole system is disrupted as the agent is no longer pursuing the interest of the principal.


title: Principal–agent problem

text: The principal and agent theory emerged in the 1970s from the combined disciplines of economics and institutional theory. There is some contention as to who originated the theory, with theorists Stephen Ross and Barry Mitnick both claiming authorship. Ross is said to have originally described the dilemma in terms of a person choosing a flavor of ice-cream for someone whose tastes he does not know ("Ibid"). The most cited reference to the theory, however, comes from Michael C. Jensen and William Meckling. The theory has come to extend well beyond economics or institutional studies to all contexts of information asymmetry, uncertainty and risk.


title: Principal–agent problem

text: In the context of law, principals do not know enough about whether (or to what extent) a contract has been satisfied, and they end up with agency costs. The solution to this information problem—closely related to the moral hazard problem—is to ensure the provision of appropriate incentives so agents act in the way principals wish.


title: Principal–agent problem

text: In terms of game theory, it involves changing the rules of the game so that the self-interested rational choices of the agent coincide with what the principal desires. Even in the limited arena of employment contracts, the difficulty of doing this in practice is reflected in a multitude of compensation mechanisms and supervisory schemes, as well as in critique of such mechanisms as e.g., Deming (1986) expresses in his Seven Deadly Diseases of management.


title: Principal–agent problem

text: In the context of the employment contract, individual contracts form a major method of restructuring incentives, by connecting as closely as optimal the information available about employee performance, and the compensation for that performance. Because of differences in the quantity and quality of information available about the performance of individual employees, the ability of employees to bear risk, and the ability of employees to manipulate evaluation methods, the structural details of individual contracts vary widely, including such mechanisms as "piece rates, [share] options, discretionary bonuses, promotions, profit sharing, efficiency wages, deferred compensation, and so on." Typically, these mechanisms are used in the context of different types of employment: salesmen often receive some or all of their remuneration as commission, production workers are usually paid an hourly wage, while office workers are typically paid monthly or semimonthly (and if paid overtime, typically at a higher rate than the hourly rate implied by the salary). The way in which these mechanisms are used is different in the two parts of the economy which Doeringer and Piore called the "primary" and "secondary" sectors (see also dual labour market).


title: Principal–agent problem

text: The secondary sector is characterised by short-term employment relationships, little or no prospect of internal promotion, and the determination of wages primarily by market forces. In terms of occupations, it consists primarily of low or unskilled jobs, whether they are blue-collar (manual-labour), white-collar (e.g., filing clerks), or service jobs (e.g., waiters). These jobs are linked by the fact that they are characterized by "low skill levels, low earnings, easy entry, job impermanence, and low returns to education or experience." In a number of service jobs, such as food service, golf caddying, and valet parking jobs, workers in some countries are paid mostly or entirely with tips.


title: Principal–agent problem

text: The use of tipping is a strategy on the part of the owners or managers to align the interests of the service workers with those of the owners or managers; the service workers have an incentive to provide good customer service (thus benefiting the company's business), because this makes it more likely that they will get a good tip.


title: Principal–agent problem

text: The issue of tipping is sometimes discussed in connection with the principal–agent theory. "Examples of principals and agents include bosses and employees ... [and] diners and waiters." "The "principal–agent problem", as it is known in economics, crops up any time agents aren't inclined to do what principals want them to do. To sway them [(agents)], principals have to make it worth the agents' while ... [in the restaurant context,] the better the diner's experience, the bigger the waiter's tip." "In the ... language of the economist, the tip serves as a way to reduce what is known as the classic "principal–agent" problem." According to "Videbeck, a researcher at the New Zealand Institute for the Study of Competition and Regulation[,] '[i]n theory, tipping can lead to an efficient match between workers' attitudes to service and the jobs they perform. It is a means to make people work hard. Friendly waiters will go that extra mile, earn their tip, and earn a relatively high income...[On the other hand,] if tipless wages are sufficiently low, then grumpy waiters might actually choose to leave the industry and take jobs that would better suit their personalities.'"


title: Principal–agent problem

text: As a solution to the principal–agent problem, though, tipping is not perfect. In the hopes of getting a larger tip, a server, for example, may be inclined to give a customer an extra large glass of wine or a second scoop of ice cream. While these larger servings make the customer happy and increase the likelihood of the server getting a good tip, they cut into the profit margin of the restaurant. In addition, a server may dote on generous tippers while ignoring other customers, and in rare cases harangue bad tippers.


title: Principal–agent problem

text: Part of this variation in incentive structures and supervisory mechanisms may be attributable to variation in the level of intrinsic psychological satisfaction to be had from different types of work. Sociologists and psychologists frequently argue that individuals take a certain degree of pride in their work, and that introducing performance-related pay can destroy this "psycho-social compensation", because the exchange relation between employer and employee becomes much more narrowly economic, destroying most or all of the potential for social exchange. Evidence for this is inconclusive—Deci (1971), and Lepper, Greene and Nisbett (1973) find support for this argument; Staw (1989) suggests other interpretations of the findings.


title: Principal–agent problem

text: Incentive structures as mentioned above can be provided through non-monetary recognition such as acknowledgements and compliments on an employee (agent) in place of employment. Research conducted by Crifo and Diaye (2004) mentioned that agents who receive compensations such as praises, acknowledgement and recognition help to define intrinsic motivations that increase performance output from the agents thus benefiting the principal.


title: Principal–agent problem

text: Furthermore, the studies provided a conclusive remark that intrinsic motivation can be increased by utilising the use of non-monetary compensations that provide acknowledgement for the agent. These higher rewards, can provide a principal with the adequate methodologies to improve the effort inputs of the agent when looking at the principal agent theory through an employer vs employee level of conduct.


title: Principal–agent problem

text: On a related note, Drago and Garvey (1997) use Australian survey data to show that when agents are placed on individual pay-for-performance schemes, they are less likely to help their coworkers. This negative effect is particularly important in those jobs that involve strong elements of "team production" (Alchian and Demsetz 1972), where output reflects the contribution of many individuals, and individual contributions cannot be easily identified, and compensation is therefore based largely on the output of the team. In other words, pay-for-performance increases the incentives to free-ride, as there are large positive externalities to the efforts of an individual team member, and low returns to the individual (Holmström 1982, McLaughlin 1994).


title: Principal–agent problem

text: The negative incentive effects implied are confirmed by some empirical studies, (e.g., Newhouse, 1973) for shared medical practices; costs rise and doctors work fewer hours as more revenue is shared. Leibowitz and Tollison (1980) find that larger law partnerships typically result in worse cost containment. As a counter, peer pressure can potentially solve the problem (Kandel and Lazear 1992), but this depends on peer monitoring being relatively costless to the individuals doing the monitoring/censuring in any particular instance (unless one brings in social considerations of norms and group identity and so on). Studies suggest that profit-sharing, for example, typically raises productivity by 3–5% (Jones and Kato 1995, Knez and Simester 2001), although there are some selection issues (Prendergast).


title: Principal–agent problem

text: There is however considerable empirical evidence of a positive effect of compensation on performance (although the studies usually involve "simple" jobs where aggregate measures of performance are available, which is where piece rates should be most effective). In one study, Lazear (1996) saw productivity rising by 44% (and wages by 10%) in a change from salary to piece rates, with a half of the productivity gain due to worker selection effects. Research shows that pay for performance increases performance when the task at hand is more repetitive, and reduces performance when the task at hand requires more creative thinking.


title: Principal–agent problem

text: Furthermore, formulated from their studies that compensation tend to have an impact on performance as a result of risk aversion and the level of work that a CEO is willing to input. This showed that when the CEO returned less effort then the data correlated a pay level of neutral aversion based on incentives. However, when offered incentives the data correlated a spike in performance as a direct result.


title: Principal–agent problem

text: Conclusively, their studies indicated business owner (principal) and business employees (agents) must find a middle ground which coincides with an adequate shared profit for the company that is proportional to CEO pay and performance. In doing this risk aversion of employee efforts being low can be avoided pre-emptively.


title: Principal–agent problem

text: Milgrom and Roberts (1992) identify four principles of contract design: When perfect information is not available, Holmström (1979) developed the Informativeness Principle to solve this problem. This essentially states that any measure of performance that (on the margin) reveals information about the effort level chosen by the agent should be included in the compensation contract. This includes, for example, Relative Performance Evaluation—measurement relative to other, similar agents, so as to filter out some common background noise factors, such as fluctuations in demand. By removing some exogenous sources of randomness in the agent's income, a greater proportion of the fluctuation in the agent's income falls under his control, increasing his ability to bear risk. If taken advantage of, by greater use of piece rates, this should improve incentives. (In terms of the simple linear model below, this means that increasing "x" produces an increase in "b".)


title: Principal–agent problem

text: However, setting incentives as intense as possible is not necessarily optimal from the point of view of the employer. The Incentive-Intensity Principle states that the optimal intensity of incentives depends on four factors: the incremental profits created by additional effort, the precision with which the desired activities are assessed, the agent's risk tolerance, and the agent's responsiveness to incentives. According to Prendergast (1999, 8), "the primary constraint on [performance-related pay] is that [its] provision imposes additional risk on workers ..." A typical result of the early principal–agent literature was that piece rates tend to 100% (of the compensation package) as the worker becomes more able to handle risk, as this ensures that workers fully internalize the consequences of their costly actions. In incentive terms, where we conceive of workers as self-interested rational individuals who provide costly effort (in the most general sense of the worker's input to the firm's production function), the more compensation varies with effort, the better the incentives for the worker to produce.


title: Principal–agent problem

text: The third principle—the Monitoring Intensity Principle—is complementary to the second, in that situations in which the optimal intensity of incentives is high corresponds highly to situations in which the optimal level of monitoring is also high. Thus employers effectively choose from a "menu" of monitoring/incentive intensities. This is because monitoring is a costly means of reducing the variance of employee performance, which makes more difference to profits in the kinds of situations where it is also optimal to make incentives intense.


title: Principal–agent problem

text: The fourth principle is the Equal Compensation Principle, which essentially states that activities equally valued by the employer should be equally valuable (in terms of compensation, including non-financial aspects such as pleasantness of the workplace) to the employee. This relates to the problem that employees may be engaged in several activities, and if some of these are not monitored or are monitored less heavily, these will be neglected, as activities with higher marginal returns to the employee are favoured. This can be thought of as a kind of "disintermediation"—targeting certain measurable variables may cause others to suffer. For example, teachers being rewarded by test scores of their students are likely to tend more towards teaching 'for the test', and de-emphasise less relevant but perhaps equally or more important aspects of education; while AT&T's practice at one time of paying programmers by the number of lines of code written resulted in programs that were longer than necessary—i.e., program efficiency suffering (Prendergast 1999, 21). Following Holmström and Milgrom (1990) and Baker (1992), this has become known as "multi-tasking" (where a subset of relevant tasks is rewarded, non-rewarded tasks suffer relative neglect). Because of this, the more difficult it is to completely specify and measure the variables on which reward is to be conditioned, the less likely that performance-related pay will be used: "in essence, complex jobs will typically not be evaluated through explicit contracts." (Prendergast 1999, 9).


title: Principal–agent problem

text: Where explicit measures are used, they are more likely to be some kind of aggregate measure, for example, baseball and American Football players are rarely rewarded on the many specific measures available (e.g., number of home runs), but frequently receive bonuses for aggregate performance measures such as Most Valuable Player. The alternative to objective measures is subjective performance evaluation, typically by supervisors. However, there is here a similar effect to "multi-tasking", as workers shift effort from that subset of tasks which they consider useful and constructive, to that subset which they think gives the greatest appearance of being useful and constructive, and more generally to try to curry personal favour with supervisors. (One can interpret this as a destruction of organizational social capital—workers identifying with, and actively working for the benefit of, the firm – in favour of the creation of personal social capital—the individual-level social relations which enable workers to get ahead ("networking").)


title: Principal–agent problem

text: The four principles can be summarized in terms of the simplest (linear) model of incentive compensation:


title: Principal–agent problem

text: where "w" (wage) is equal to "a" (the base salary) plus "b" (the intensity of incentives provided to the employee) times the sum of three terms: "e" (unobserved employee effort) plus "x" (unobserved exogenous effects on outcomes) plus the product of "g" (the weight given to observed exogenous effects on outcomes) and "y" (observed exogenous effects on outcomes). "b" is the slope of the relationship between compensation and outcomes.


title: Principal–agent problem

text: The above discussion on explicit measures assumed that contracts would create the linear incentive structures summarised in the model above. But while the combination of normal errors and the absence of income effects yields linear contracts, many observed contracts are nonlinear. To some extent this is due to income effects as workers rise up a tournament/hierarchy: "Quite simply, it may take more money to induce effort from the rich than from the less well off." (Prendergast 1999, 50). Similarly, the threat of being fired creates a nonlinearity in wages earned versus performance. Moreover, many empirical studies illustrate inefficient behaviour arising from nonlinear objective performance measures, or measures over the course of a long period (e.g., a year), which create nonlinearities in time due to discounting behaviour. This inefficient behaviour arises because incentive structures are varying: for example, when a worker has already exceeded a quota or has no hope of reaching it, versus being close to reaching it—e.g., Healy (1985), Oyer (1997), Leventis (1997). Leventis shows that New York surgeons, penalised for exceeding a certain mortality rate, take less risky cases as they approach the threshold. Courty and Marshke (1997) provide evidence on incentive contracts offered to agencies, which receive bonuses on reaching a quota of graduated trainees within a year. This causes them to 'rush-graduate' trainees in order to make the quota.


title: Principal–agent problem

text: In certain cases agency problems may be analysed by applying the techniques developed for financial options, as applied via a real options framework. Stockholders and bondholders have different objective—for instance, stockholders have an incentive to take riskier projects than bondholders do, and to pay more out in dividends than bondholders would like. At the same time, since equity may be seen as a call option on the value of the firm, an increase in the variance in the firm value, other things remaining equal, will lead to an increase in the value of equity, and stockholders may therefore take risky projects with negative net present values, which while making them better off, may make the bondholders worse off. See Option pricing approaches under Business valuation for further discussion. Nagel and Purnanandam (2017) notice that since bank assets are risky debt claims, bank equity resembles a subordinated debt and therefore the stock's payoff is truncated by the difference between the face values of the corporation debt and of the bank deposits. Based on this observation, Peleg-Lazar and Raviv (2017) show that in contrast to the classical agent theory of Michael C. Jensen and William Meckling, an increase in variance would not lead to an increase in the value of equity if the bank's debtor is solvent.


title: Principal–agent problem

text: The major problem in measuring employee performance in cases where it is difficult to draw a straightforward connection between


title: Principal–agent problem

text: performance and profitability is the setting of a standard by which to judge the performance. One method of setting an absolute objective performance standard—rarely used because it is costly and only appropriate for simple repetitive tasks—is time-and-motion studies, which study in detail how fast it is possible to do a certain task. These have been used constructively in the past, particularly in manufacturing. More generally, however, even within the field of objective performance evaluation, some form of relative performance evaluation must be used. Typically this takes the form of comparing the performance of a worker to that of his peers in the firm or industry, perhaps taking account of different exogenous circumstances affecting that.


title: Principal–agent problem

text: The reason that employees are often paid according to hours of work rather than by direct measurement of results is that it is often more efficient to use indirect systems of controlling the quantity and quality of effort, due to a variety of informational and other issues (e.g., turnover costs, which determine the optimal minimum length of relationship between firm and employee). This means that methods such as deferred compensation and structures such as tournaments are often more suitable to create the incentives for employees to contribute what they can to output over longer periods (years rather than hours). These represent "pay-for-performance" systems in a looser, more extended sense, as workers who consistently work harder and better are more likely to be promoted (and usually paid more), compared to the narrow definition of "pay-for-performance", such as piece rates. This discussion has been conducted almost entirely for self-interested rational individuals. In practice, however, the incentive mechanisms which successful firms use take account of the socio-cultural context they are embedded in (Fukuyama 1995, Granovetter 1985), in order not to destroy the social capital they might more constructively mobilise towards building an organic, social organization, with the attendant benefits from such things as "worker loyalty and pride (...) [which] can be critical to a firm's success ..." (Sappington 1991,63)


title: Principal–agent problem

text: Subjectivity is related to judgement based on a supervisor's subjective impressions and opinions, which can be expressed through the use of subjective performance measures, "ex post" flexibility in the weighting of objective performance measures, or "ex post" discretional adjustment, all of which are based on factors other than performance measures specified "ex ante". Subjective performance evaluation allows the use of a subtler, more balanced assessment of employee performance, and is typically used for more complex jobs where comprehensive objective measures are difficult to specify and/or measure. Whilst often the only feasible method, the attendant problems with subjective performance evaluation have resulted in a variety of incentive structures and supervisory schemes. One problem, for example, is that supervisors may under-report performance in order to save on wages, if they are in some way residual claimants, or perhaps rewarded on the basis of cost savings. This tendency is of course to some extent offset by the danger of retaliation and/or demotivation of the employee, if the supervisor is responsible for that employee's output.


title: Principal–agent problem

text: Another problem relates to what is known as the "compression of ratings". Two related influences—centrality bias, and leniency bias—have been documented (Landy and Farr 1980, Murphy and Cleveland 1991). The former results from supervisors being reluctant to distinguish critically between workers (perhaps for fear of destroying team spirit), while the latter derives from supervisors being averse to offering poor ratings to subordinates, especially where these ratings are used to determine pay, not least because bad evaluations may be demotivating rather than motivating. However, these biases introduce noise into the relationship between pay and effort, reducing the incentive effect of performance-related pay. Milkovich and Wigdor (1991) suggest that this is the reason for the common separation of evaluations and pay, with evaluations primarily used to allocate training.


title: Principal–agent problem

text: Finally, while the problem of compression of ratings originates on the supervisor-side, related effects occur when workers actively attempt to influence the appraisals supervisors give, either by influencing the performance information going to the supervisor: multitasking (focussing on the more visibly productive activities—Paul 1992), or by working "too hard" to signal worker quality or create a good impression (Holmström 1982); or by influencing the evaluation of it, e.g., by "currying influence" (Milgrom and Roberts 1988) or by outright bribery (Tirole 1992).


title: Principal–agent problem

text: Much of the discussion here has been in terms of individual pay-for-performance contracts; but many large firms use internal labour markets (Doeringer and Piore 1971, Rosen 1982) as a solution to some of the problems outlined. Here, there is "pay-for-performance" in a looser sense over a longer time period. There is little variation in pay within grades, and pay increases come with changes in job or job title (Gibbs and Hendricks 1996). The incentive effects of this structure are dealt with in what is known as "tournament theory" (Lazear and Rosen 1981, Green and Stokey (1983), see Rosen (1986) for multi-stage tournaments in hierarchies where it is explained why CEOs are paid many times more than other workers in the firm). See the superstar article for more information on the tournament theory.


title: Principal–agent problem

text: Workers are motivated to supply effort by the wage increase they would earn if they win a promotion. Some of the extended tournament models predict that relatively weaker agents, be they competing in a sports tournaments (Becker and Huselid 1992, in NASCAR racing) or in the broiler chicken industry (Knoeber and Thurman 1994), would take risky actions instead of increasing their effort supply as a cheap way to improve the prospects of winning.


title: Principal–agent problem

text: These actions are inefficient as they increase risk taking without increasing the average effort supplied. Neilson (2007) further added to this from his studies which indicated that when two employees competed to win in a tournament they have a higher chance of bending and or breaking the rules to win. Nelson (2007) also indicated that when the larger the price (incentive) the more inclined the agent (employee in this case) is to increase their effort parameter from Neilson's studies.


title: Principal–agent problem

text: A major problem with tournaments is that individuals are rewarded based on how well they do relative to others. Co-workers might become reluctant to help out others and might even sabotage others' effort instead of increasing their own effort (Lazear 1989, Rob and Zemsky 1997). This is supported empirically by Drago and Garvey (1997). Why then are tournaments so popular? Firstly, because—especially given compression rating problems—it is difficult to determine absolutely differences in worker performance. Tournaments merely require rank order evaluation.


title: Principal–agent problem

text: Secondly, it reduces the danger of rent-seeking, because bonuses paid to favourite workers are tied to increased responsibilities in new jobs, and supervisors will suffer if they do not promote the most qualified person. This effectively takes the factors of ambiguity away from the principal agent problem by ensuring that the agent acts in the best interest of the principal but also ensures that the quality of work done is of an optimal level.


title: Principal–agent problem

text: Thirdly, where prize structures are (relatively) fixed, it reduces the possibility of the firm reneging on paying wages. As Carmichael (1983) notes, a prize structure represents a degree of commitment, both to absolute and to relative wage levels. Lastly when the measurement of workers' productivity is difficult, e.g., say monitoring is costly, or when the tasks the workers have to perform for the job is varied in nature, making it hard to measure effort and/or performance, then running tournaments in a firm would encourage the workers to supply effort whereas workers would have shirked if there are no promotions.


title: Principal–agent problem

text: like a call option on performance (which increases in value with increased volatility (cf. options pricing).


title: Principal–agent problem

text: If you are one of ten players competing for the asymmetrically large top prize, you may benefit from reducing the expected


title: Principal–agent problem

text: value of your overall performance to the firm in order to increase your chance that you have an outstanding performance


title: Principal–agent problem

text: (and win the prize). In moderation this can offset the greater risk aversion of agents vs principals because their social capital is concentrated in their employer while in the case of public companies the principal typically owns his stake as part of a diversified portfolio. Successful innovation is particularly dependent on employees' willingness to take risks. In cases with extreme incentive intensity, this sort of behavior can create catastrophic organizational failure. If the principal owns the firm as part of a diversified portfolio this may be a price worth paying for the greater chance of success through innovation elsewhere in the portfolio. If however the risks taken are systematic and cannot be diversified e.g., exposure to general housing prices, then such failures will damage the interests of principals and even the economy as a whole.


title: Principal–agent problem

text: (cf. Kidder Peabody, Barings, Enron, AIG to name a few). Ongoing periodic catastrophic organizational failure


title: Principal–agent problem

text: is directly incentivized by tournament and other superstar/winner-take-all compensation systems (Holt 1995).


title: Principal–agent problem

text: Tournaments represent one way of implementing the general principle of "deferred compensation", which is essentially an agreement between worker and firm to commit to each other. Under schemes of deferred compensation, workers are overpaid when old, at the cost of being underpaid when young. Salop and Salop (1976) argue that this derives from the need to attract workers more likely to stay at the firm for longer periods, since turnover is costly. Alternatively, delays in evaluating the performance of workers may lead to compensation being weighted to later periods, when better and poorer workers have to a greater extent been distinguished. (Workers may even prefer to have wages increasing over time, perhaps as a method of forced saving, or as an indicator of personal development. e.g., Loewenstein and Sicherman 1991, Frank and Hutchens 1993.) For example, Akerlof and Katz 1989: if older workers receive efficiency wages, younger workers may be prepared to work for less in order to receive those later. Overall, the evidence suggests the use of deferred compensation (e.g., Freeman and Medoff 1984, and Spilerman 1986—seniority provisions are often included in pay, promotion and retention decisions, irrespective of productivity.)


title: Principal–agent problem

text: The "principal–agent problem" has also been discussed in the context of energy consumption by Jaffe and Stavins in 1994. They were attempting to catalog market and non-market barriers to energy efficiency adoption. In efficiency terms, a market failure arises when a technology which is both cost-effective and saves energy is not implemented. Jaffe and Stavins describe the common case of the landlord-tenant problem with energy issues as a principal–agent problem. "[I]f the potential adopter is not the party that pays the energy bill, then good information in the hands of the potential adopter may not be sufficient for optimal diffusion; adoption will only occur if the adopter can recover the investment from the party that enjoys the energy savings. Thus, if it is difficult for the possessor of information to convey it credibly to the party that benefits from reduced energy use, a principal/agent problem arises."


title: Principal–agent problem

text: The energy efficiency use of the principal agent terminology is in fact distinct from the usual one in several ways. In landlord/tenant or more generally equipment-purchaser/energy-bill-payer situations, it is often difficult to describe who would be the principal and who the agent. Is the agent the landlord and the principal the tenant, because the landlord is "hired" by the tenant through the payment of rent? As Murtishaw and Sathaye, 2006 point out, "In the residential sector, the conceptual definition of principal and agent must be stretched beyond a strictly literal definition."


title: Principal–agent problem

text: Another distinction is that the principal agent problem in energy efficiency does not require any information asymmetry: both the landlord and the tenant may be aware of the overall costs and benefits of energy-efficient investments, but as long as the landlord pays for the equipment and the tenant pays the energy bills, the investment in new, energy-efficient appliances will not be made. In this case, there is also little incentive for the tenant to make a capital efficiency investment with a usual payback time of several years, and which in the end will revert to the landlord as property. Since energy consumption is determined both by technology and by behavior, an opposite principal agent problem arises when the energy bills are paid by the landlord, leaving the tenant with no incentive to moderate her energy use. This is often the case for leased office space, for example.


title: Principal–agent problem

text: The energy efficiency principal agent problem applies in many cases to rented buildings and apartments, but arises in other circumstances, most often involving relatively high up-front costs for energy-efficient technology. Though it is challenging to assess exactly, the principal agent problem is considered to be a major barrier to the diffusion of efficient technologies. This can be addressed in part by promoting shared-savings performance-based contracts, where both parties benefit from the efficiency savings. The issues of market barriers to energy efficiency, and the principal agent problem in particular, are receiving renewed attention because of the importance of global climate change and rising prices of the finite supply of fossil fuels. The principal–agent problem in energy efficiency is the topic of an International Energy Agency report: "Mind the Gap—Quantifying Principal–Agent Problems in Energy Efficiency" (2007).


title: Principal–agent problem

text: The problem manifests itself in the ways middle managers discriminate against employees who they deem to be "overqualified" in hiring, assignment, and promotion, and repress or terminate "whistleblowers" who want to make senior management aware of fraud or illegal activity. This may be done for the benefit of the middle manager and against the best interest of the shareholders (or members of a non-profit organization).


title: Principal–agent problem

text: Public officials are agents, and people adopt constitutions and laws to try to manage the relationship, but officials may betray their trust and allow themselves to be unduly influenced by lobby groups or they may abuse their authority and managerial discretion by showing personal favoritism or bad faith by hiring an unqualified friend or by engaging in corruption or patronage, such as selecting the firm of a friend or family member for a no-bid contract.


title: Principal–agent problem

text: The problem arises in client–attorney, probate executor, bankruptcy trustee, and other such relationships. In some rare cases, attorneys who were entrusted with estate accounts with sizeable balances acted against the interests of the person who hired them to act as their agent by embezzling the funds or "playing the market" with the client's money (with the goal of pocketing any proceeds).


title: Principal–agent problem

text: This section can also be explored from the perspective of the trust game which captures the key elements of principal–agent problems. This game was first experimentally implemented by Berg, Dickhaut, and McCabe in 1995. The setup of the game is that there are two players – trustor/principal (investor) and agents (investee). The trustor is endowed with a budget and come transfer some of the amounts to an agent in expectation of return over the transferred amount in the future. The trustee may send any part of the transferred amount back to the trustor. The amount transferred back by the trustee is referred to as trustworthiness. Most of the studies find that 45% of the endowment was transferred by the principal and around 33% transferred back by an agent. This means that investors are not selfish and can be trusted for economic transactions.


title: Principal–agent problem

text: In the context of public administration, the principal–agent problem can be seen in such a way where public administration and bureaucrats are the agents and politicians and ministers are the principal authorities. Ministers in the government usually command by framing policies and direct the bureaucrats to implement the public policies. However, there can be various principal-agent problems in the scenario such as misaligned intentions, information asymmetry, adverse selection, shirking, and slippage.


title: Principal–agent problem

text: There are various situations where the ambitions and goals of the principals and agents may diverge. For example, politicians and the government may want public administration to implement a welfare policy program but the bureaucrats may have other interests as well such as rent-seeking. This results in a lack of implementation of public policies, hence the wastage of economic resources. This can also lead to the problem of shirking which is characterized as avoidance of performing a defined responsibility by the agent.


title: Principal–agent problem

text: The information asymmetry problem occurs in a scenario where one of the two people has more or less information than the other. In the context of public administration, bureaucrats have an information advantage over the government and ministers as the former work at the ground level and have more knowledge about the dynamic and changing situation. Due to this government may frame policies that are not based on complete information and therefore problems in the implementation of public policies may occur. This can also lead to the problem of slippage which is defined as a myth where the principal sees that agents are working according to the pre-defined responsibilities but that might not be the reality.


title: Principal–agent problem

text: The problem of adverse selection is related to the selection of agents to fulfill particular responsibilities but they might deviate from doing so. The prime cause behind this is the incomplete information available at the desk of selecting authorities (principal) about the agents they selected. For example, the Ministry of Road and Transport Highways hired a private company to complete one of its road projects, however, it was later found that the company assigned to complete road projects lacked technical know-how and had management issues.


title: Principal–agent problem

text: In economic theory, the principal-agent approach (also called agency theory) is part of the field "contract theory". In agency theory, it is typically assumed that complete contracts can be written, an assumption also made in mechanism design theory. Hence, there are no restrictions on the class of feasible contractual arrangements between principal and agent.


title: Principal–agent problem

text: Agency theory can be subdivided in two categories: (1) In adverse selection models, the agent has private information about his type (say, his costs of exerting effort or his valuation of a good) "before" the contract is written. (2) In moral hazard models, the agent becomes privately informed "after" the contract is written. Hart and Holmström (1987) divide moral hazard models in the categories "hidden action" (e.g., the agent chooses an unobservable effort level) and "hidden information" (e.g., the agent learns his valuation of a good, which is modelled as a random draw by nature). In hidden action models, there is a stochastic relationship between the unobservable effort and the verifiable outcome (say, the principal's revenue), because otherwise the unobservability of the effort would be meaningless. Typically, the principal makes a take-it-or-leave-it offer to the agent; i.e., the principal has all bargaining power. In principal–agent models, the agent often gets a strictly positive rent (i.e. his payoff is larger than his reservation utility, which he would get if no contract were written), which means that the principal faces agency costs. For example, in adverse selection models the agent gets an information rent, while in hidden action models with a wealth-constrained agent the principal must leave a limited-liability rent to the agent. In order to reduce the agency costs, the principal typically induces a second-best solution that differs from the socially optimal first-best solution (which would be attained if there were complete information). If the agent had all bargaining power, the first-best solution would be achieved in adverse selection models with one-sided private information as well as in hidden action models where the agent is wealth-constrained.


title: Principal–agent problem

text: Contract-theoretic principal–agent models have been applied in various fields, including financial contracting, regulation, public procurement, monopolistic price-discrimination, job design, internal labor markets, team production, and many others.


title: Principal–agent problem

text: From the cybernetics point of view, the Cultural Agency Theory arose in order to better understand the socio-cultural nature of organisations and their behaviours.


title: Principal–agent problem

text: In the negotiation problem, the principal commissions an agent to conduct negotiations on its behalf. The principal may delegate certain authority to the agent, including the ability to conclude negotiations and enter into binding contracts. The principal may consider and assign a utility to each issue in the negotiation. However, it is not always the case that the principal will explicitly inform the agent of what it considers to be the minimally acceptable terms, otherwise known as the reservation price. The successfulness of a negotiation will be determined by a range of factors. These include: the negotiation objective, the role of the negotiating parties, the nature of the relationship between the negotiating parties, the negotiating power of each party and the negotiation type. Where there are information asymmetries between the principal and agent, this can affect the outcome of the negotiation. As it is impossible for a manager to attend all upcoming negotiations of the company, it is common practice to assign internal or external negotiators to represent the negotiating company at the negotiation table. With the principal–agent problem, two areas of negotiation emerge:


title: Principal–agent problem

text: The principal-agent problem arises in representative negotiations where the interests of the principal and the agent are misaligned. The principal cannot directly observe the agent's efforts during the course of the negotiation. In such circumstances, this may lead to the agent employing negotiation tactics which are unfavourable to the principal, but which benefit the agent. An example is the scenario where both the principal and the other negotiating party desire the swift resolution of a difficult and costly matter. Where the principal's respective agents are compensated on an hourly basis, the agent has an incentive to unnecessarily prolong the negotiation in order to increase their own monetary gain. However, the principal can observe the outcome of the finalised negotiation. Where the agent's effort is the sole factor in determining the success of a negotiation, the principal can rationally deduce what course of action the agent took. In reality, the outcome is often determined by several exogenous factors beyond the principal or agent's control. Depending upon how the agent's reward is determined, the principal may be able to effectively retain control over the agent. If the agent receives a fixed fee, the agent may nonetheless act in a manner that is inconsistent with the principal's interests. The agent may adopt this strategy if they believe the negotiation is a one-shot game. The agent may adopt a different strategy if they account for reputational consequences of acting against the principal's interests. Similarly, if the negotiation is a repeated game, and the principal is aware of the results of the first iteration, the agent may opt to employ a different strategy which more closely aligns with the interests of the principal in order to ensure the principal will continue to contract with the agent in the following iterations. If the agent's reward is dependent upon the outcome of the negotiation, then this may help align the differing interests.


title: Principal–agent problem

text: In practice, there is often more than one principal within the company with whom the negotiator has to agree the contract terms. Likewise, it is common to send several agents, i.e. several negotiators.


title: Honda S660

text: The Honda S660 is a two-seat targa sports car in the "kei" class manufactured by the Japanese manufacturer Honda with a transverse mid-engine and rear-wheel-drive layout. It is the successor to the Honda Beat (with regard to segment), and the Honda S2000 (with regard to nomenclature, as it also belongs to Honda's family of "S" models).


title: Honda S660

text: The S660 is a lightweight mid-engined roadster with a targa roof. Its dimensions, due to kei car size restrictions, are nearly identical to the 1990s Beat. It is sold with either a 6-speed manual transmission or a 7-speed CVT with sports paddle shifters, both options being offered on the two trims available (Alpha and Beta). The S660 weighs approximately 830 kg with the manual transmission and 850 kg with the CVT, and have a front/rear weight balance of 45/55.


title: Honda S660

text: The naming convention of using the letter "S" followed by the engine displacement is a long-held Honda tradition going back to Honda's second production car, the Honda S500 (from which the S660 draws inspiration).


title: Honda S660

text: The S660 is powered by the same turbocharged 658 cc "S07A Turbo" engine used in the N-One with some mechanical improvements. In the S660, this engine is mid-mounted and produces at 6,000 rpm and of torque at 2,600 rpm with a redline of 7,700 rpm for the manual transmission and 7,000 rpm for the CVT.


title: Honda S660

text: A prototype was shown at the November 2013 Tokyo Motor Show. The prototype and proposed production announcement were widely covered in auto enthusiast news sites and blogs. Initial reactions to the concept were favorable.


title: Honda S660

text: After the S660 entered the market, its first driving review was in June 2015 of a Japanese-market prototype driven by Top Gear in Tokyo. The author concluded that the car was "supremely maneuverable" but lacked power, something he hoped an export model with a larger motor would amend, and felt that such an export model might be a potential Mazda MX-5 competitor.


title: Honda S660

text: The prototype S660 was photographed by car enthusiasts at a wintertime car event in early 2015 and published in the Japanese car enthusiast magazine "Mag-X", and subsequently republished in the US car blog "The Truth About Cars". The pictures included several exterior photos and one of the opened engine compartment.


title: Honda S660

text: The development team of the S660 was led by Ryo Mukumoto, who beat out 400 other participants in Honda's in-house competition at the age of 22. Honda made him the youngest lead engineer in the company's history in spite of his lack of engineering experience, and he was given 5 years to develop the S660.


title: S. P. Charan

text: Sripathi Panditharadhyula Charan is an Indian film playback singer, actor, producer and director known for his works in Tamil cinema and Telugu cinema.


title: S. P. Charan

text: He is the son of legendary singer S. P. Balasubrahmanyam. He first worked as a playback singer in Tamil and Telugu. He ventured into acting with the 2003 Kannada film "Hudugigagi" and is best known for his performance in the 2008 film "Saroja". He has established a film production company called Capital Film Works, and produced several Tamil films, including the cult hit "Chennai 600028" in 2007 and the National Film Award-winning "Aaranya Kaandam" in 2012.


title: S. P. Charan

text: He is filming a new webseries in Tamil language under his home banner Capital Film Works named "Adhigaram" which would mark his debut as a director in the Tamil film industry. "Adhigaram" is an intense political thriller which touches upon sensitive issues. The release date is yet to be revealed by the crew in accordance to the pandemic situations.


title: S. P. Charan

text: Charan is the son of the late legendary singer S. P. Balasubrahmanyam and his wife Savitri. Charan, was born and raised in Chennai. Charan, has 1 Elder Sister : Pallavi. She is a singer. He Studied in Asan Memorial CBSE School, Chennai in which the popular Tamil actor Ajithkumar also studied with him and was a school friend of him. He received a bachelor's degree in Business Administration from Pace University in New York, USA in 1994 and completed a two-year course in Film and Television.


title: S. P. Charan

text: SP Charan's Adhigaram has 10 episodes, and will be an intense political thriller. Abhirami Venkatachalam has been roped in to play one of the leads in the series. Cable Shankar has penned the script and dialogue for this web series.” Athulya Ravi will also be a part of the project. The series also features actors like Vellai Pookal Dev, Ilavarasu, AL Alagappan, John Vijay and Vinodhini in important roles. SP Charan will be producing it under his home banner Capital Film Works.Adhigaram will feature music by Deena Devarajan with cinematography by Rajesh Yadav and editing by National Award winner Praveen K. L. The technical crew of Adhigaram also includes names like Manigi, who has come on board as the additional screenwriter and dialogue writer, followed by art direction by Remiyan, action sequences by Stunt Silva, costume designs by Sofiya Jenifer and C. Murugesh Babu serving as the script supervisor. Details on when Adhigaram will begin streaming is yet to made known with the production house expected to reveal in the days ahead.


title: S. P. Charan

text: Charan first acted with his father in a film called "Maha Yedabidangi", directed by K. S. L. Swamy, but the film was not released. Balachander's son Kailasam approached him to act in the television serial "Oonjal", produced by K. Balachander and directed by Sundar K. Vijayan. It was followed by Radan's "Annamalai". He also starred in a TV serial named "Bommaigal" in Tamil and "Akka Chellulu" in Telugu. His first release was the Kannada film "Hudugigagi" in 2003, directed by B. Manjunath. In 2008, he played one of the lead roles in Venkat Prabhu's "Saroja". On his performance, Sify wrote: "S.P.B Charan as Jagapathy Babu suits the role and is fantastic". He acted in "Va", in which he played Shiva's prospective brother-in-law. He acted in two Tamil films "Vanavarayan Vallavarayan" and "Vizhithiru".


title: S. P. Charan

text: Charan established the film production company Capital Film Works, in 2002. Their first production was the film "Unnai Charanadainthen", in which Charan played the lead role, alongside his friend Venkat Prabhu. The film, which notably featured musical score by Charan's father, Balasubrahmanyam, received four Tamil Nadu State Film Awards. Charan revealed that he decided to produce the film after hearing Samuthirakani's narration. He further produced the Jayam Ravi-starrer "Mazhai" (2005), a remake of the Telugu film "Varsham", which was not well received. His next production was Venkat Prabhu's directorial debut "Chennai 600028" (2007), considered a trend-setting film that featured 11 newcomers in the lead and became one of 2007's biggest commercial as well as critical successes. In 2011, his sixth production "Aaranya Kaandam", was released to critical acclaim and became noted for getting 52 cuts by the regional Central Board of Film Certification. Although it did not achieve the expected box office success, Charan won a Swarna Kamal at the 59th National Film Awards as a producer of the film. His next production will be "Thirudan Police", by another debutant, Caarthick Raju.


title: S. P. Charan

text: Charan began working as a playback singer in 1997 with "Deepangal pesum" from "Devathai", under Ilaiyaraaja's direction. About being the son of an icon, he stated: "my voice sounds so much like appa, people might not want to use a similar voice. When SPB himself is rocking, why would composers need his clone?" He has sung for composers M. M. Keeravani, A. R. Rahman and Devi Sri Prasad. Charan's most popular songs include "Nagila Nagila" from "Alaipayuthey", "Mellaga" from "Varsham", "Nenu Nenuga Lene" from "Manmadhudu", "I Love you Shailaja" from "Mazhai", "Please Sir" from "Boys", "Maaja Maaja" from "Jillunu Oru Kadhal", "Oru Nanban Irundhal" from "Enakku 20 Unakku 18", "O Shanti" from "Vaaranam Aayiram", "Nee Naan" from "Mankatha". In 2010, he recorded a song on the "Kadhal 2 Kalyanam" soundtrack for Yuvan Shankar Raja and recorded with his father for the first time in Tamil for the film "Aadukalam", for which they both won the Vijay Award for Best Male Playback Singer.


title: S. P. Charan

text: He is also seen singing in many of the concerts and stage shows like Cultural Exchange Program for the World Peace arranged by Balasai Baba in 2013.


title: S. P. Charan

text: He also anchored TV shows and audio launch events like Magadheera in Chennai. He has also seen performing at audio launch events Iravin Nizhal in Chennai recently in July 2022.


title: S. P. Charan

text: In 1996, he and childhood friends Venkat Prabhu and Premgi Amaren set up a music band called Next Generation, which also had Yugendran and Thaman as members.


title: S. P. Charan

text: Charan underwent a notable weight loss in late 2010. In response to speculation, he stated it was in response to becoming health-conscious.


title: Nate Berkus

text: Nathan Jay Berkus (born September 17, 1971) is an American interior designer, author, and television personality. He runs the Chicago interior design firm Nate Berkus Associates and was a regularly featured guest on "The Oprah Winfrey Show", offering design advice to viewers as well as coordinating surprise make-overs for people's homes. He has released numerous lines of products and authored several books.


title: Nate Berkus

text: His talk show, "The Nate Berkus Show", debuted in broadcast syndication September 13, 2010, featuring make-overs, culture, design, and personal advice. It was co-produced by Harpo Productions and Sony Pictures Television, and was cancelled in 2012 after two seasons. Since 2017, Berkus has co-hosted the TLC reality design series "Nate & Jeremiah by Design", alongside his husband Jeremiah Brent.


title: Nate Berkus

text: Berkus was born on September 17, 1971, in Orange County, California. Designer Nancy Golden, from multiple series on HGTV and DIY Network, is his mother. His father, Michael A. Berkus, co-founded the National Sports Collectors Convention. His parents divorced in 1973. Berkus grew up in a Jewish family mainly in Hopkins, Minnesota. He attended Cushing Academy, a boarding school in Ashburnham, Massachusetts.


title: Nate Berkus

text: Berkus started working in design immediately after leaving high school and interned at Dominique Aurientis in Paris and Leslie Hindman in Chicago. Berkus graduated from Lake Forest College in 1994, with B.A. degrees in French and Sociology. He founded the company, Nate Berkus Associates, in Chicago in 1995. Berkus is related to the venture capitalist Dave Berkus, architect Barry Berkus, musician/artist Günther Berkus, Josh Berkus of Software in the Public Interest, casino manager/author Eric David Berkus, and lawyer Matt Berkus.


title: Nate Berkus

text: In November 2005, Hyperion Books published Berkus's book "Home Rules: Transform the Place You Live into a Place You'll Love" (), a step-by-step guide to home design and decoration.


title: Nate Berkus

text: Berkus was the host of the short-lived reality show "Oprah's Big Give", which premiered March 2, 2008, but the series ended on April 20 that same year. On May 13, 2008, it was announced by ABC that it would not be renewed for a second season.


title: Nate Berkus

text: On September 13, 2010, he debuted as the host of his own syndicated daily show, "The Nate Berkus Show", which was co-produced by Harpo Productions and Sony Pictures Television. It was recorded in Studio 42 at the CBS Broadcast Center in New York, but aired in the nation's largest markets on the ten NBC-owned-and-operated stations. His guests included sex therapist Dr. Ruth Westheimer, whose living room and dining room he redecorated, after 50 years. In December 2011, Sony Pictures decided not to renew "The Nate Berkus Show" for a third season.


title: Nate Berkus

text: He appeared as himself on the October 12, 2011 and October 13, 2011 episodes of "Days of Our Lives", a United States daytime television soap opera, designing the offices of MadWorld Cosmetics for Madison James.


title: Nate Berkus

text: Berkus's book "The Things That Matter" was published October 16, 2012 by Spiegel & Grau. It became a "New York Times" Best Seller and was named "One of the Best Interior Design Books of the Year" by the "Washington Post".


title: Nate Berkus

text: Also in October 2012, Berkus collaborated with Target stores to launch his Target Home collection, a 150-piece line that includes bedding, bath, accessories, lighting, rugs, and window treatments. Since then he has released many different collections for season changes as well as holidays. He recently released a line of stationery and office essentials alongside his 2015 Cali-inspired spring collection.


title: Nate Berkus

text: In March 2013, television journalists noted Berkus began working on a primetime series with NBC, initially titled "Renovation Nation". By May 2013 the title was changed to "American Dream Builders". Berkus was the host and one of the producers of the show in which, according to NBC, "American top designers, builders, architects and landscapers go head-to-head each week, putting their talents to the test on extreme home renovations." The show was not renewed after its first season.


title: Nate Berkus

text: Alongside his husband, fellow interior designer Jeremiah Brent, he launched in 2017 the TV show "Nate & Jeremiah by Design" broadcast on TLC network. On August 30, 2017 it was announced that "Nate & Jeremiah by Design" had been picked up for a second season.


title: Nate Berkus

text: In December 2004, Berkus and his then-partner, photographer Fernando Bengoechea, were vacationing at a beach resort in Sri Lanka when the 2004 Indian Ocean tsunami hit. While Berkus survived, Bengoechea was missing and presumed dead. Berkus appeared on "The Oprah Winfrey Show" on January 17, 2005, to talk about the ordeal and the loss of his partner.


title: Nate Berkus

text: After nearly a year of dating, Berkus became engaged to fellow interior designer Jeremiah Brent in April 2013. They were married on May 4, 2014, in Manhattan. They have two children born via surrogates: a daughter, Poppy Brent-Berkus, born on March 23, 2015, and a son, Oskar Michael Brent-Berkus, born on March 26, 2018. Berkus and his family currently live in Manhattan.


title: Nate Berkus

text: In early 2014, they were featured in clothier Banana Republic's "True Outfitters" ads in "InStyle" and "Rolling Stone", among other magazines. "The New York Times" noted they were the first same-sex couple to be featured in ads for the magazines. Their Manhattan apartment was featured in the September 2015 issue of "Architectural Digest" magazine, where Nate Berkus and Jeremiah Brent appeared on the cover with their daughter Poppy.


The Chinese People's Political Consultative Conference (CPPCC, ), also known as the People's PCC (, ) or simply the PCC (), is a political advisory body in the People's Republic of China and a central part of the Chinese Communist Party (CCP)'s United Front system. Its members advise and put proposals for political and social issues to government bodies. However, the CPPCC is a body without real legislative power. While consultation does take place, it is supervised and directed by the CCP.


title: Chinese People's Political Consultative Conference

text: The body traditionally consists of delegates from the CCP and its front organizations, eight legally-permitted political parties subservient to the CCP, as well as nominally independent members. The CPPCC is chaired by a member of the Politburo Standing Committee of the Chinese Communist Party. In keeping with the United Front strategy, prominent non-CCP members have been included among the Vice Chairs, examples being Chen Shutong, Li Jishen and Soong Ching-ling.


text: The organizational hierarchy of the CPPCC consists of a National Committee and regional committees. Regional committees extend to the provincial, prefecture, and county level. According to the constitution of the CPPCC, the relationship between the National Committee and the regional committees is one of guidance and not direct leadership. However, an indirect leadership exists via the United Front Work Department at each level. The National Committee of the Chinese People's Political Consultative Conference (, shortened ) typically holds a yearly meeting at the same time as plenary sessions of the National People's Congress (NPC). The CPPCC National Committee and NPC plenary sessions are collectively called the "Quanguo Lianghui" ("National Two Sessions").


text: The CPPCC is intended to be more representative of a broader range of people than is typical of government office in the People's Republic of China. According to Sinologist Peter Mattis, the CPPCC is "the one place where all the relevant actors inside and outside the party come together: party elders, intelligence officers, diplomats, propagandists, soldiers and political commissars, united front workers, academics, and businesspeople." In practice, the CPPCC serves as "the place where messages are developed and distributed among party members and the non-party faithful who shape perceptions of the CCP and China." The composition of the members of the CPPCC changes over time according to national strategic priorities. Previously dominated by senior figures in real-estate, state-owned enterprises, and "princelings", the CPPCC in 2018 was primarily composed of individuals from China's technology sector.


text: The Conference dated prior to the existence of the People's Republic of China. During negotiations between the Chinese Communist Party and the Kuomintang in 1945, the two parties agreed to open multiparty talks on post-World War II political reforms via a Political Consultative Conference. This was included in the Double Tenth Agreement. This agreement was implemented by the National Government of the Republic of China, who organized the first Political Consultative Assembly from January 10–31, 1946. Representatives of the Kuomintang, CCP, Chinese Youth Party, and China Democratic League, as well as independent delegates, attended the conference in Chongqing.


text: In 1949, with the Communist Party having gained control of most of mainland China, they organized a "new" Political Consultative Conference in September, inviting delegates from various friendly parties to attend and discuss the establishment of a new state. This conference was then renamed the People's Political Consultative Conference. The first conference approved the Common Program, which served as the de facto constitution for the next five years. The conference approved the new national anthem, flag, capital city, and state name, and elected the first government of the People's Republic of China. In effect, the first People's Political Consultative Conference served as a constitutional convention.


text: From 1949 to 1954, the conference became the de facto legislature of the PRC. In 1954, the Constitution transferred this function to the National People's Congress.


text: The CPPCC is the "peak united front forum, bringing together CCP officials and Chinese elites." The CPPCC includes the CCP, eight small legally-permitted parties, and independent nonparty "friends." It provides a "seat" for the non-communist parties and so-called "patriotic democrats." The conception of the non-communist parties as part of a coalition rather than an opposition is expressed in the PRC's constitutional principle of "political consultation and multiparty cooperation." This constitutional principle obliges the CCP to consult the others on all major policy issues. Particularly since the 2000s, CPPCC members frequently petition the Central Committee of the Chinese Communist Party regarding socioeconomic, health, and environmental issues.


text: According to state media Xinhua News Agency, it is neither a body of state power nor a policymaking organ, but a platform for participating in state affairs. In practice, CPPCC members serve as advisors for the government and legislative and judicial organs.


text: The CCP and the aligned "democratic parties" participate in the CPPCC. Besides political parties, CPPCC has also representatives from various sectors of society in its ranks. The parties and groups with representatives to the CPPCC are as follows:


text: The National Committee CPPCC is the national level organization that represents the CPPCC nationally and is made up of deputies coming from various sectors of society. Deputies of the NC-CPPCC are elected for 5 year terms.


text: In between plenary sessions of the National Committee the duties of the CPPCC are performed by the Standing Committee of the NC-CPPCC. It is responsible for all actions taken by the whole of the National Committee of the Conference or by individual deputies of it. Faction leaders of the National Committee lead the sectoral or party delegations in the Standing Committee that are assigned seats.


text: The "" () is the press window of information on direct policies and viewpoints of the CPPCC. Like most of the Chinese political organs, the newspaper serves as the mouthpiece for the conference.


text: The following regional committees are modelled after the National Committee with identical composition of deputies elected to them and are each supervised by regional level Standing Committees: