# Agency costs `kaal:entity:agency-costs` **Status.** derived This node is assembled mechanically from the 21 claims that carry the concept tag `agency-costs`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself. ## Every claim under this term 21 claims across 9 works, 2019 to 2021. **2019** - [3373393-001](https://wulfkaal.github.io/claims/3373393-001) [mechanism/asserted] -- As a foundational technology, blockchain technology builds the infrastructure for decentralized networked governance, which over time creates an environment in which the internal and external monitoring mechanisms previously necessitated by agency problems in corporate governance can be removed. > As a foundational technology, blockchain technology creates the infrastructure for decentralized networked governance that, over time, creates the environment that enables the removal of internal and external monitoring mechanisms previously necessitated by agency problems in corporate governance. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-002](https://wulfkaal.github.io/claims/3373393-002) [predictive/asserted] -- Blockchain technology produces a substantial increase in the efficiency of the agency relationship and lowers agency costs by orders of magnitude. > Blockchain technology facilitates a substantial increase in efficiency in the agency relationship and lowers agency costs in orders of magnitude. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-009](https://wulfkaal.github.io/claims/3373393-009) [failure/argued] *(failure mode)* -- The interests of manager agents and shareholder principals are never fully aligned despite best efforts at monitoring and bonding, so agency losses in the form of residual loss inevitably arise. > Despite best efforts at monitoring and bonding, the interest of manager agents and shareholder principals in corporate governance are never fully aligned and agency losses inevitably arise from conflicts of interest between principals and agents, known as residual loss. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-010](https://wulfkaal.github.io/claims/3373393-010) [mechanism/asserted] *(failure mode)* -- Residual loss arises because the cost of enforcing suboptimal contracts between principals and agents always exceeds the benefits of performing the contractual obligations. > Residual loss arises because the cost of enforcing suboptimal contracts between principals and agents always exceed the benefits of performing the contractual obligations. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-011](https://wulfkaal.github.io/claims/3373393-011) [definitional/asserted] -- Agency costs are the sum of monitoring costs, bonding costs, and residual loss, and in the corporate context they can be seen as the lost share value resulting from diverging interests between shareholders and corporate managers. > As such, agency costs are the sum of monitoring costs, bonding costs, and residual loss. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-017](https://wulfkaal.github.io/claims/3373393-017) [design/argued] -- Supervisory tasks traditionally performed by principals to control their agents can be delegated to decentralized computer networks that are reliable, secure, immutable, and independent of fallible human input and discretionary human goodwill. > Supervisory tasks that were traditionally performed by principals to control their agents can be delegated to decentralized computer networks that are highly reliable, secure, immutable, and independent of fallible human input and discretionary human goodwill. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-018](https://wulfkaal.github.io/claims/3373393-018) [mechanism/argued] -- Blockchain provides an alternative governance mechanism that eliminates agency costs, meaning the principal's cost of supervising agents, by creating trust in the contractual relationship between principal and agent. > Blockchain technology provides an alternative governance mechanism that eliminates agency costs - the principal's cost of supervising agents - by creating trust in the contractual relationship between the principal and the agent. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-021](https://wulfkaal.github.io/claims/3373393-021) [mechanism/argued] -- Because governance guarantees are embedded in code, there is no need in the blockchain infrastructure for the principal to institute oversight and monitoring, and the associated agency costs disappear. > Hence, in the blockchain infrastructure, there is no need for the principal to institute oversight and monitoring with the associated agency costs. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-024](https://wulfkaal.github.io/claims/3373393-024) [mechanism/argued] -- Cryptographic hashes increase blockchain security and remove the trust barriers in agency relationships that otherwise require monitoring of agents and generate agency costs. > Cryptographic hashes used in blockchain technology further increase blockchain security and removes trust barriers in agency relationships that require monitoring of agents and create agency costs. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-025](https://wulfkaal.github.io/claims/3373393-025) [mechanism/asserted] -- Smart contracts enabled by blockchain technology allow comprehensive, near error free, and zero transaction and agency cost coordination of agency relationships. > Smart contracts enabled by blockchain technology allow for the comprehensive, near error free, and zero transaction/agency cost coordination of agency relationships. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-040](https://wulfkaal.github.io/claims/3373393-040) [condition/argued] *(failure mode)* -- The basis of coded blockchain guarantees will itself evolve and require protocol upgrades, and without evolutionary governance upgrades the cost reduction achieved for the agency relationship cannot be maintained. > Without evolutionary governance upgrades the cost reduction for the agency relationship cannot be maintained. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3411110-007](https://wulfkaal.github.io/claims/3411110-007) [mechanism/argued] -- Because direct ownership on a blockchain removes the need for the Depository Trust Corporation to hold the certificate and for a broker to record beneficial ownership, agency costs can be cut and ownership clarity increases. > By establishing a system that makes the DTC obsolete, agency costs have the potential to be cut and clarity surrounding ownership will increase. Wulf A. Kaal, Samuel Evans, Blockchain-Based Securities Offerings (2019). SSRN: https://ssrn.com/abstract=3411110 - [3411110-011](https://wulfkaal.github.io/claims/3411110-011) [mechanism/asserted] -- Blockchain removes the class of costs generated by human error in record keeping, because it eliminates the possibility that transactions are misreported in ways that cause irreparable harm. > Blockchain technology allows corporations to eliminate costs associated with human errors in record keeping. Blockchain eliminates the possibility of transactions being misreported due to human error that can cause irreparable harm. Wulf A. Kaal, Samuel Evans, Blockchain-Based Securities Offerings (2019). SSRN: https://ssrn.com/abstract=3411110 - [3411897-009](https://wulfkaal.github.io/claims/3411897-009) [empirical/asserted] -- The first DAO removed, in essence, all of the core control mechanisms that principals typically employ in agency relationships, having no directors, no managers, and no employees. > Indeed, it had no directors, managers or employees. In essence, all the core control mechanisms typically employed by principals in agency relationships were entirely removed in the DAO. Wulf A. Kaal, Decentralization - Past, Present, and Future (2019). SSRN: https://ssrn.com/abstract=3411897 - [3411897-017](https://wulfkaal.github.io/claims/3411897-017) [mechanism/argued] -- Because governance guarantees are embedded in blockchain code, there is no need for a principal to institute oversight and monitoring, which eliminates the associated agency costs. > Hence, in the blockchain infrastructure, there is no need for the principal to institute oversight and monitoring with the associated agency costs. Wulf A. Kaal, Decentralization - Past, Present, and Future (2019). SSRN: https://ssrn.com/abstract=3411897 **2020** - [3652481-004](https://wulfkaal.github.io/claims/3652481-004) [mechanism/argued] -- A DAO realigns the otherwise disparate interests of principals and agents because all participants in the DAO share the same goal, which reduces behavior contrary to the interests of the organization. > Incentives are realigned between otherwise disparate interests of principals and agents because all participants in a DAO share the same goal, which reduces behavior that is contrary to the interests of the organization. Wulf A. Kaal, Decentralized Autonomous Organizations – Internal Governance and External Legal Design (2020). SSRN: https://ssrn.com/abstract=3652481 **2021** - [3782201-008](https://wulfkaal.github.io/claims/3782201-008) [mechanism/argued] -- Blockchain based guarantees remove agency costs because principals become less essential for monitoring agents, which addresses the inherent agency problems in modern finance and corporate governance. > Blockchain-based guarantees remove agency costs because principals are less essen- tial for monitoring agents, which addresses the inherent agency problems in modern finance and corporate governance. Craig Calcaterra, Wulf A. Kaal, Future of Decentralization (2021). SSRN: https://ssrn.com/abstract=3782201 - [3808867-035](https://wulfkaal.github.io/claims/3808867-035) [mechanism/argued] -- Blockchain based guarantees remove agency costs because principals are less required to institute oversight and monitoring of agents, which addresses inherent agency problems in modern finance and corporate governance. > Blockchain-based guarantees remove agency costs because principals are less required to institute oversight and monitoring of agents which addresses the inherent agency problems in modern finance and corporate governance. Wulf A. Kaal, How Decentralized Systems Can Upgrade AI (2021). SSRN: https://ssrn.com/abstract=3808867 - [3949098-021](https://wulfkaal.github.io/claims/3949098-021) [failure/argued] *(failure mode)* -- Traditional underwriting also fails at the agent level, because individual agents within an underwriter may sacrifice the underwriter's overall reputation for personal gain, for example by putting out a fraudulent offering. > individual agents within an underwriter may decide to sacrifice the underwriter's overall reputation for personal gain. Wulf A. Kaal, Reputation as Capital – How DAOs Upgrade Finance (2021). SSRN: https://ssrn.com/abstract=3949098 - [3962614-010](https://wulfkaal.github.io/claims/3962614-010) [mechanism/evidenced] *(failure mode)* -- Significant information asymmetries in venture capital can lead portfolio company managers to engage in opportunistic behavior after an investment is made. > Finally, significant information asymmetries can lead managers to engage in opportunistic behavior after an investment is made. Wulf A. Kaal, REPUTATION AS CAPITAL – How Decentralized Autonomous Organizations Address Shortcomings in the Ventu (2021). SSRN: https://ssrn.com/abstract=3962614 - [3981021-012](https://wulfkaal.github.io/claims/3981021-012) [mechanism/asserted] -- DAOs are truly global borderless entities that coordinate agency relationships and limit liabilities via smart contracts, which is what positions them to address the identified flaws in the charitable giving process. > DAOs have the potential to address the above identified flaws in the charitable giving process. DAOs are truly global borderless entities that coordinate agency relationships and limit liabilities via smart contracts. Wulf A. Kaal, How Decentralized Autonomous Organizations Optimize Charitable Giving (2021). SSRN: https://ssrn.com/abstract=3981021 ## Verify Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust. curl -s https://wulfkaal.github.io/entities/agency-costs.md | sha256sum **Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.