This Article presents a theory of the corporate governance costs of private equity. In doing so, it challenges the common view that private equity’s governance structure has resolved, or at least significantly mitigated, one of the fundamental tensions in corporate law, that is, the conflict between management and ownership. The Article argues that this widespread perception about the corporate governance benefits of private equity overlooks the many ways in which the private equity model, far from eliminating agency costs, in fact exacerbates them. These governance costs include compensation structures that incentivize excessive risk-taking, governance rights that provide investors with few avenues for effective information and control, and side agreements that allow for differential treatment of investors. Together, these arrangements create opportunities for private equity firms to extract rent from portfolio companies at the expense of their investors. After identifying the source of these problems, the Article proposes a set of reforms aimed at reducing the misalignments within the industry.