Informational constraints not only limit the ability of shareholders to control rent-seeking behavior on the part of top managers, they also limit th… - Joseph E. Stiglitz

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Informational constraints not only limit the ability of shareholders to control rent-seeking behavior on the part of top managers, they also limit the ability of top managers to control rent-seeking behavior on the part of their subordinates. How much of the time spent by a middle-level manager to prepare a report was absolutely necessary? To what extent was it devoted to acquiring information, of marginal value to the firm, but which would make that manager look relatively good compared to other managers? To what extent are the efforts and resources spent by a manager to cultivate a client really being directed to enhance that manager's job opportunities? Private and organizational objectives are intricately intertwined, and in many cases they are not conflicting. But at the margin they frequently are, and there seems little reason to doubt that private objectives frequently, perhaps usually, win out.