Stealing is costly and the manager expects to lose C(S)"(S2/2k) when he
steals because, for example, other people need to be paid off and there is some
probability that the manager will be caught and punished. A higher value of
k } representing, in this case, weaker corporate governance rules or a weaker
legal system or both } means that it is less costly to steal. Thus, the value of
stealing, S!C(S), is concave in S. The marginal value of stealing falls as the
amount stolen increases because it becomes harder to steal as the absolute
amount of theft increases; the stealing becomes more obvious and easier for
a court to stop.1