The Agent’s Problem

Asaf Eckstein, Gideon Parchomovsky

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

The agency problem, the idea that corporate directors and officers are motivated to prioritize their self-interest over the interest of their corporation, has had a long-lasting impact on corporate-law theory and practice. In recent years, however, as federal agencies have stepped up enforcement efforts against corporations, a new problem has surfaced: what we call the “reverse agency problem.” The surge in criminal investigations against corporations, combined with the rising popularity of settlement mechanisms, including pretrial diversion agreements and corporate plea agreements, has led corporations to sacrifice directors and officers in order to reach settlements with law enforcement authorities as expeditiously as possible. This phenomenon is the mirror image of the agency problem—the agent’s problem.

Original languageEnglish
Pages (from-to)1509-1567
Number of pages59
JournalDuke Law Journal
Volume70
Issue number7
StatePublished - Apr 2021
Externally publishedYes

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