The Case for a Trusteeship Approach to Corporate Governance
Abstract: The purpose of this paper is to survey two different approaches to the governance of the corporation: one based on agency theory and the other based on the notion of trusteeship. It is argued that while agency focuses on divergence of interests and on obedience to the agenda set by the principal, trusteeship asks directors to behave as trustworthy mediators. The paper then reviews an influential line of thought in American corporate law claiming that the analysis of the case and statutory law favors a trusteeship, rather than agency, interpretation of the role of corporate directors. I then argue that the trusteeship approach to corporate governance forms a natural basis in order to advocate for extended fiduciary duties to all legitimate stakeholders. Finally, I outline a model that provides foundations for the stakeholders’ choice whether to transact via the market or via the trustee.