Figure One: Control Costs

Principal

Agent

Competence Costs

Lack of expertise

Inadequate information

Lack of intelligence

Poor emotional control

Coordination problems

Cognitive myopia

Lack of expertise

Inadequate information

Lack of intelligence

Poor emotional control

Overconfidence bias

Optimism bias

Conflict Costs

Collective-action problems

Reneging on promises

Rational apathy

Rational reticence

Holdouts

Empty voting

Different horizons

Shirking (reduced effort)

Diverting (self-dealing)

Option backdating

Entrenchment

Merging for size

Merging for diversification

Excessive or inefficient pay