We study the macroeconomic implications of agency issues between shareholders and managers. Following \cite{jensen1986agency}, managers tend to over-invest (``empire building''), and do not minimize costs (the ``quiet life''), but are disciplined by the threat of takeover. We embed these frictions in a standard macroeconomic model with firm heterogeneity in productivity and factor adjustment costs. We assume that some firms are well-run (corresponding to a zero takeover cost), some are run by unconstrained managers (corresponding to an infinite takeover cost) and the rest are subject to a finite, nonzero takeover cost, and hence become endogenously well-run or poorly run depending on their capital and productivity. In equilibrium, agency frictions spill over from poorly-run firms to well-run firms: the poorly-run firms underprice the well-run, overuse inputs, leading to aggregate efficiency costs that are larger than the direct individual efficiency costs of the poorly-run firms. We argue that rising shareholder power (lower costs of takeover) in the U.S. since the 1970s has contributed to some important macroeconomic trends, such as lower investment and labor share, and higher profitability, payouts and Tobin's Q.