Agency conflicts in the presence of random private benefits from project implementation

Even when the agent is risk-neutral, we show that the principal's optimal contract always insufficiently discourages the agent from implementing negative NPV projects and also insufficiently encourages the agent to implement positive NPV projects. We also show that the principal's residual claim always increases in the project's NPV, a result that is generally unobtainable for optimal contracts in effort-based moral hazard problem settings.