Background : The Agency Cost of Equity occurs when the CEO holds less than 100% of the equity of the firm. Taking into account not only the CEO's ownership but also all forms of equity-based compensation (including holdings of restricted shares (shares vesting with the passage of time), performance shares (shares vesting upon meeting performance hurdles) and stock options (giving the executive the right to buy a share of stock at a pre-determined "exercise price"), the typical CEO of an S&P 500 corporation has an effective ownership position of about 0.4%. That is, whenever shareholder wealth increases by $1000, the CEO's wealth (from all sources) increases by about $4 dollars.

Assuming you believe that 0.4% ownership is too low to significantly mitigate the Agency Cost of Equity, why do you think CEOs apparently have such poor incentives?