The ''obscure puzzle'' of management control. Any remedy?

With the advent of managerial capitalism the problem of control of management has grown and widened in scope, from enforcing strict shareholders' value maximisation to more general requirements of best practices, ethics or social responsibility. Yet ''there is a continuous and seemingly endless stream of reports of value-destroying behavior by individuals, groups, and organizations (...) The fact that these scandals keep arising in spite of the ongoing and varied attempts to curtail such behavior amounts to an 'obscure puzzle' '' (Erhard and Jensen 2014, p.4). By means of a simple model where opportunistic managers under the veil of asymmetric information can appropriate resources of shareholders and make the stock market inefficient, I provide an accessible guidance to the key issues at stake. I also review the theoretical (and practical) limits of the ''classical'' remedies: market discipline, incentive schemes, ownership concentration, delegated monitoring, rule of the law. The paper is closed by claiming a role for managers' self-control, i.e. promotion of business ethics in particular intrinsic motivations as part of managerial culture and identity.