Regulatory vs.Governance Strategies Regulatory:dictate substantive terms that govern the content of the principal-agent relationship,tending to constrain the agent's behavior directly. Governance:facilitate the principals'control over their agent's behavior. Regulatory:depends crucially on the ability of the principals to exercise the control rights accorded to them(coordination costs). Governance:depend on the ability of an external authority to determine whether or not the agent complied with particular prescription(a court or eregulatory body)Regulatory vs. Governance Strategies Regulatory: dictate substantive terms that govern the content of the principal-agent relationship, tending to constrain the agent’s behavior directly. Governance: facilitate the principals’ control over their agent’s behavior. Regulatory: depends crucially on the ability of the principals to exercise the control rights accorded to them (coordination costs). Governance: depend on the ability of an external authority to determine whether or not the agent complied with particular prescription (a court or regulatory body)