Agency problem: Difference between revisions

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 Skin in the game problem: Agents paid no matter what. [[Investment manager]]s take a slice of your pie - a small(ish) slice, admittedly, but they put no capital up, and they take out their fee first, whatever the performance.
 ===The agency problem and [[corporate personality]]===
-Theory: the “legal revolution” theorists — academics, [[GC]]s, [[COO]]s and [[thought leader]]s generally — make the category error of assuming the interests of client ''[[corporation]]s'' drive the market. This is, of course, fully aligned with axiomatic legal theory: a corporation is a person, has its own personality, interests and desires. But the corporation as a [[res legis]] — a [[legally significant thing|legal thing]] — is only a [[res cogitans]] — a [[thinking thing]] — through the agency of its representatives, each of whom is a [[res cognitans]] in her own right. This tension, between the interests of an [[agent]] and {{sex|her}} [[principal]] is the crux of the agency problem.
+Theory: the “legal revolution” theorists — academics, [[GC]]s, [[COO]]s and [[thought leader]]s generally — make the category error of assuming the interests of client ''[[corporation]]s'' drive the market. This is, of course, fully aligned with axiomatic legal theory: a corporation is a person, has its own personality, interests and desires. But the corporation as a [[res legis]] — a [[legally significant thing|legal thing]] — is only a [[res cogitans]] — a “thinking thing” — through the agency of its representatives, each of whom is a [[res cogitans]] in her own right. This tension, between the overriding life goals of an [[agent]] and those of {{sex|her}} [[principal]] is the crux of the agency problem. They do align — but ''only so far''.
-Note the critical difference here: in this agency dilemma ''a [[corporation]] cannot speak for itself''. A principal who is a thinking thing himself can apprehend the conflict of interest and police it. A pile of papers filed at companies house cannot. It can only ''crowd-source'' the defence of its actual interests, by asking the aggregated weight of a whole lot of its ''other'' agents to represent its interests against any given one agent in a kind of “wisdom of crowds” way. This works as long as the self-interests of each of the other agents sort of cancel themselves out. If all the agents have a common self-interest which conflicts with the corporation’s interests, this crowdsourcing strategy won’t work.
+Note the critical difference between human and [[corporation]] here: ''a [[corporation]] cannot speak for itself''. A ''human'' principal, being a thinking, animate thing, can apprehend the [[conflicts of interest]] of which {{sex|he}} may be a casualty, and police them. A pile of papers filed at companies house cannot. It can only ''crowd-source'' defence of its own interests to its “friends” who ''are'' animate, but who have interests of their own. It can seek to nullify any ''one'' agent’s conflicting interest by asking the aggregated weight of its ''other'' agents to represent its against that one agent in a kind of “wisdom of crowds” way — their ''individual'' interests disappearing through some kind of phase cancellation effect to which their ''common'' interest — furthering the interest of their mutual principal the [[corporation]] — is immune. This works as long as the self-interests of each of the other agents ''do'' cancel themselves out: if all the agents have a ''common'' self-interest which conflicts with the corporation’s interests, this crowdsourcing strategy won’t work.
 So do all its agents have such a common conflicting interest? ''Yes''.