RETHINKING AGENCY THEORY: THE VIEW

We draw from legal theory to offer a fundamental rethinking of agency theory along three key dimensions: redefining the principal from shareholders to the corporation, redefining the status of the board from shareholders ’ agents to autonomous fiducia-ries, and redefining the role of the board from monitors to mediating hierarchs. These dimensions contrast with classic agency theory, offering novel conceptions that can inform further theorization and empirical research in corporate governance. Agency theory, rooted in economics and fi-nance thinking (Fama, 1980; Fama & Jensen, 1983a,b; Jensen & Meckling, 1976), has become a cornerstone of the corporate governance field, not only in terms of its impact on the literature but also in terms of policy and practice (Daily