The wrong kind of transparency

In a model of career concerns for experts, when is a principal hurt from observing more information about her agent? This paper introduces a distinction between information on the consequence of the agents action and information directly on the agents action. When the latter kind of information is available, the agent faces an incentive to disregard useful private signals and act according to how an able agent is expected to act a priori. This conformist behavior hurts the principal in two ways: the decision made by the agent is less likely to be the right one (discipline) and ex post it is more di ¢ cult to evaluate the agents ability (sorting). The paper identi\u85es a necessary and su ¢ cient condition on the agent signal structure under which the principal bene\u85ts from committing not to observe the agents action. The paper also shows the existence of strategic complementarities between information on action and information on consequence. The results on the distinction between action and consequence are then used to interpret existing disclosure policies in delegated portfolio management. In particular, they are consistent with hitherto puzzling evidence that mutual funds systematically overperform pension funds.