Last week, I noted UCLA law professor Stephen Bainbridge’s excellent explanation of corporate agency costs and why shareholders deserve protection from theft, but not from risk-taking.

In this typically insightful post, University of Illinois law professor Larry Ribstein follows up on Bainbridge’s article and provides an equally lucid summary of the risks to justice and the rule of law that result from a policy of criminalizing corporate agency costs. After listing seven such problems, Professor Ribstein concludes as follows:

All of this means that in order to prosecute corporate agency costs we have necessarily given lots of discretion to prosecutors. The result is a potential prosecutorial agency cost problem that threatens to rival the corporate agency costs being prosecuted.