Abstract
Conventional agency theory typically focuses on a unidirectional problem, in which an agent behaves opportunistically against the interests of a principal. We argue that this conceptualization is too limited to fully describe all aspects of principal-agent relationships, and develop a more comprehensive framework explaining a potential three-directional problem--that is, (i) agents behave opportunistically against the interests of principals, (ii) principals behave opportunistically against the interests of agents, and (iii) the dynamic relationships between agents and principals (whether representing conflict or confluence) affect the interests of third-party stakeholders. We provide evidence of these problems and describe unique characteristics, implications for society, and purported governance solutions for each. We conclude by discussing the implications of our framework for the ongoing debate between shareholder and stakeholder views of the firm and their respective implications for society.
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