failure family

agency cost and managerial opportunism

50 claims across 30 works.

• advisor-home-bias: European lawyers may advise clients to incorporate at home simply because those lawyers do not want to deal with the courts and lawyers of another Mem
• agent-incomprehension: Moral hazard is worsened when the financial products traded are so complex that the agents, mostly on the buy side, do not entirely understand them an
• unmonitorable-rating-agent: The issuer-buyer relationship and the incentives inside it are unlikely to be able to adequately control the principal-agent relationship between issu
• misaimed conflict focus: German corporate law's historical focus on conflicts between controlling and minority shareholders leaves it poorly equipped to address managerial abu
• Governance-blind CoCo compensation designs: Early European initiatives to put contingent convertible bonds into executive pay lack governance-improving designs; contingent convertible bonds with
• Control rights fail against ex post opportunism: Control rights in executive compensation contracts cannot sufficiently constrain ex post opportunism by executives, because of incomplete information,
• Lapsing award destroys the liquidation value stake: Because the Barclays award falls away rather than converting, it does not create a fixed claim giving managers a stake in the firm's liquidation value
• CoCo pay as compensation supplement only: A contingent capital award to executives without a conversion feature yields only limited governance improvement and only limited incentive to lower r
• Insufficient volume for dilution or recapitalization: Contingent convertible bonds issued to executives are typically too small in volume to dilute investors' equity holdings or to supply a meaningful equ
• Fiduciary duties insufficient against large payoffs: Where rules and regulatory guidance are absent, fiduciary duties are the only constraint on executives, and existing fiduciary duties could prove insu
• Inside debt has no solvency preserving mechanism: The governance benefits of traditional inside debt, incentive optimization and reduced agency costs, all depend on the entity remaining solvent, and i
• adversarial-competitor-voting: Absent cross holdings, the opposite conflict arises: institutions holding a competitor's converted contingent capital could be tempted to exercise the
• failure of comprehensive contracting: Opportunistic behavior, transaction costs, and bounded rationality undermine comprehensive contracting, so contracting parties do not specify all of t
• inability to adapt to unforeseen contingencies: Parties in the incomplete contract model cannot adapt to unforeseen contingencies because they cannot specify ex-ante how those contingencies will be
• Side-by-side management conflict: The inherent conflict of interest facing an adviser who simultaneously runs a mutual fund and a hedge fund is an important limiting factor on the cont
• delegated diligence collapse: Madoff's reliance on large feeder funds created a massive industry of investor due diligence lawsuits, because those funds collected high advisory fee
• High fees paired with underperformance: Average unconstrained mutual fund performance over the three years preceding the study was lower than the return on the ten-year Treasury, and poor pe
• Fee structure unjustified by net of fee performance: In the Buffett and Seides wager on net of fee returns, the passive S&P 500 index position produced a 7.1% compounded annual return after nine years ag
• director-self-interest-blocks-corporate-claims: Corporate claims frequently go unpursued because the decision to sue rests with directors who are often the wrongdoers themselves, which is why shareh
• management-entrenchment-through-standstill: Standstill agreements entrench management and can lead a company into stagnation, so they may operate prejudicially on shareholders' property rights.
• shareholder empowerment misfire: Reforms that increase executive accountability to shareholders and increase shareholder control over executives do not solve the problem of corporate
• Lawyer as transaction obstacle: Lawyers have often failed to perform the function of active transaction engineer and have instead become a hindrance or obstacle to transactions.
• Erosion of professional trust: The result of this pattern is reputational: lawyers have developed a reputation as the least trusted of professions.
• trust deficit ceiling on adoption: Internet based platform businesses and distributed ledger technology businesses have not reached their full potential, and the core factor holding the
• irreducible-agency-problem: The core underlying agency problems of corporate governance cannot be fully resolved within the existing theoretical and legal infrastructure, despite
• code-only-agency-breakdown: The notion that smart contract agency relationships run exactly as coded with no possibility of agent opportunism is less likely to hold in complex ag
• irreducible-agency-conflict: The core agency conflicts that emanate from the separation of ownership by shareholder principals and control by manager agents cannot be fully addres
• incomplete-contracting: Because of bounded rationality, incomplete foresight, and information asymmetries, it is impossible for principals to contract for every possible acti
• residual-loss: The interests of manager agents and shareholder principals are never fully aligned despite best efforts at monitoring and bonding, so agency losses in
• enforcement-cost-exceeds-benefit: Residual loss arises because the cost of enforcing suboptimal contracts between principals and agents always exceeds the benefits of performing the co
• universal-solution-mismatch: Existing governance mechanisms work well in some firms but are ineffective in others, because agency conflicts and their specific scope differ from fi
• code-only-governance-in-complex-relationships: As agency relationships become more complex, a backstop for human behavior becomes necessary, and the claim that smart contract agency relationships r
• decentralization-does-not-cure-trust: Although smart contracting in decentralized systems is perceived as creating trust through preordained coded coordination without agency problems, dec
• Breach triggered by shift in DAO prospects: Breach by underwriters will in general happen only after a dramatic shift in the DAO's future prospects, such as a sharp decrease in expected future r
• unresolved separation of ownership and control: Agency theory and the existing legal framework have failed to resolve the core agency conflict arising from the separation of ownership and control, s
• unaccountable delegation: Without the ability to hold representatives to account, representatives are not incentivized to vote for outcomes reflecting their constituency's wish
• intermediary perverse incentive: Human middlemen have an incentive not to entirely eliminate the corruption they are paid to overcome, which is one reason they become falsely identifi
• absence of crowd controls over reviewer preference: Without crowd controls, the reviewer's views and the author's intent are at odds and the reviewer can impose their own logic, forcing the author to re
• Representative incentive misalignment: Elected representatives are incentivized to maintain their own power of office rather than to vote for outcomes reflecting the presumptive wishes and
• Agent Expropriation Of Firm Reputation: Traditional underwriting also fails at the agent level, because individual agents within an underwriter may sacrifice the underwriter's overall reputa
• PR ability displaces allocation skill: Because time spent raising capital from limited partners is time taken away from portfolio company due diligence, the current VC model tends to reflec
• Post investment managerial opportunism: Significant information asymmetries in venture capital can lead portfolio company managers to engage in opportunistic behavior after an investment is
• Fee driven incentive distortion: The typical VC fee based compensation structure can lead to serious shortcomings, including excessive fundraising, suboptimal investments, misevaluati
• central-authority-neglect: A central authority is perfectly well incentivized to ignore minor problems that only partially eat into its profits, so long as it maintains ultimate
• Minimum compliance degeneration: Without the promise of improving reputation, a zero-sum mentality dominates a contractual arrangement and each party's best strategy becomes exerting
• rule gaming after value loss: As an organization loses touch with its transcendental values, members use the rules to jockey for position in the hierarchy and corruption erodes the
• Extrinsic motivation principal agent spiral: Traditional work in centralized structures is prone to extrinsically motivated engagement, which intensifies principal agent problems and produces sub
• defense-driven entrenchment: Traditional board defenses such as staggered boards and poison pills protect incumbent boards at the cost of value creation and reduce board accountab
• settlement entrenchment: Negotiated settlements that hand activists board seats risk entrenching incumbents, whereas LER's consumptive utilities are designed to produce consen
• selective issuance disloyalty: Issuing LER selectively to management-aligned shareholders while excluding others breaches the duty of loyalty by creating an uneven playing field, so