The rents agents can extract from principals increase with the magnitude of
incentive problems, which the literature usually takes as given. We
endogenize it, by allowing agents to choose more or less opaque and complex
technologies. In our overlapping generations model, agents compete with
their predecessors. We study if virtuous old-timers can keep young managers’
rent-seeking in check. With dynamic contracts, long horizons help principals
incentivize agents. Hence, old agents are imperfect substitutes for young
ones. This mutes down competition between generations, especially if
compensation deferral is strong. As a result, young managers can opt for
more opaque and complex technologies, and therefore larger rents, than their
predecessors. Thus, in equilibrium, complexity and rents rise over time.