Sunday, November 11, 2012

Triangle Problem

The triangle problem involving principal-agent relationships is one that agents struggle with in many different situations and circumstances.  Agents in client-serving roles have to contend with the best interests both long-term and short-term of their client, as well as the best interests both long-term and short-term of their employer.  This problem can be applied to many different circumstances, such as the example of the law firm associate given in the prompt.  It can be very difficult to manage the best interests of both parties, and many times these situations can lead to negative results for one, or both, of the parties involved.

A high profile example of this triangle problem that differs from the problems facing a law firm associate is the situation facing the commissioner of the major American professional sports leagues.  For example, Roger Goodell, is appointed to his position by the owners of each franchise in the NFL.  Because his appointment and ultimately his employment status, is determined by the owners' satisfaction with his work, he has great motivation to act in the best interests of the owners when determining how to govern the league.  Was this his only principal, Goodell would govern the league in a way that generated the absolute most profit possible for the NFL, with no other concerns.  However, Goodell also has a responsibility to maintain the good-standing and reputation with the fans supporting the league and players playing in it. Goodell acts as the disciplinarian regarding fines and suspensions for all player issues, and while owners would certainly prefer their star players not missing games, Goodell must enforce necessary consequences required by the rules and regulations of the league.

Lately there has also been a large outcry about increasing player safety within the NFL as well. While these measures certainly will not increase profits for ownership, Goodell has implemented new safety regulations and the league is constantly in the process of researching ways to improve player safety.  While an argument can be made that every decision Goodell makes ultimately is in the best benefit of the owners and therefore the triangle problem does not exist, this simply is not the case.  An example of this was decision not to expand the regular season to 18 games.  Owners would prefer more games as it allows for more revenue opportunities, however it would greatly impact player safety as more and more players would get hurt over the course of the season.  Many of the owners are older in age that are only concerned with making short-term profits and not the state of the league 30 years from now.  Goodell shows that by not expanding the season, he is not governing solely in the best interest of the owners. but also with the reputation and well-being of everyone involved with the league in mind as well.

Goodell is forced to walk a thin line as he needs to appease the owners enough to stay employed as commissioner of the league, but also not to cave to all of their demands in order to act in the way he feels best protects of the entire league as a whole.

1 comment:

  1. The commissioner role is to preserve integrity of the game, first and foremost, but then find new ways to market the game and thereby expand the demand for the product. An example of the first sort of commissioner is Kenesaw Mountain Landis. And example of the second sort is Pete Rozelle. The current circumstance with player concussions and their health after they retire is somewhere in between, in my view. Seeing an interview with Brian Urlacher recently, it seems that the players themselves are very near term oriented and don't think about their long term health while they are playing. So that poses some interesting challenges as the league must act with respect to the players much like a parent acts with respect to their children.