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Home›Principal-Agent Theory›Who needs a CEO? Replace them with DAO!

Who needs a CEO? Replace them with DAO!

By Terrie Graves
April 28, 2021
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Executive compensation is voted on at least every three years under the Business and Regulatory Reform Act, forcing shareholders and the public to confront what executives bring home. Tim Steiner, FTSE 100The highest-paid CEO of his company, earned £ 58.7million in 2019, or 2,605 times his employee’s average income for that year.

The problem speaks for itself, and it is high time that companies questioned whether they should have a CEO.

CEO or DAO?

DAO tackle a long-standing governance problem characterized as a major agent by political scientists and economists. This problem occurs when the representative of an organization, other people or entities of an organization, can decide on their behalf or influence them.

Moral hazard in such contexts arises if the agent acts for himself rather than for the benefit of the manager since the manager cannot completely control his conduct. As with Turkey, the operator of the cryptocurrency trading site has received an international arrest warrant. Faruk Fatih Ozer is said to have fled the 391,000 investors to Albania with an alleged sum of $ 2 billion.

DAOs are open-source, therefore transparent and, in theory, incorruptible. All of the organization’s transactions are recorded and maintained on a blockchain. The interests of the members of the organization are – if properly designed – aligned with the incentive rules related to the native token. Proposals are the main means of making decisions within a DAO, which are voted on by the majority consensus of the network actors involved.

DAOs can be risky

Automating work, especially in public roles, can be risky. After Microsoft sacked a large group of journalists last year to replace them with AI, the software’s inability to identify two women of color almost instantly had to face public relations disaster. After learning to discriminate against women, Amazon AI faces the same problem.

The examples are all attempts to automate the type of work that takes place without involving other people in the business. Strategic decisions at the highest level are different. Business owners discuss the results before implementation. Workers often feel like they can’t speak for fear of the CEO’s disappointment, another reason why they should be executed.

A positive outlook

When automated management and, as Google or IBM calls it, business intelligence is used; impressive results are obtained. Hong Kong’s mass transit system put the software on its maintenance schedule in 2004 and is renowned for being one of the most on-time and fastest subways in the world.

Despite the little feedback, we’ll likely see a lot more DAOs for various purposes grow alongside the pioneering Bitcoin technology. Smart real estate governance can also be integrated directly into the blockchain in conjunction with the ‘Internet of things», Enabling surveillance of cars, security depots and buildings through autonomous organizations.

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