Origin of the Theory of Agency:

An Account by One of the Theory’s Originators

Barry M. Mitnick
Professor of Business Administration
Katz Graduate School of Business
University of Pittsburgh
261 Mervis Hall
Pittsburgh, PA 15260
Tel.: 412 648-1555
Email: mitnick@[Link]

Rev. May 2019

April 2018
March 2013
July 2012
March 2011
November 2006
January 2006
October 2005
 2
Abstract

Origin of the Theory of Agency:

An Account by One of the Theory’s Originators

Barry M. Mitnick

The first scholars to propose, explicitly, that a theory of agency be created, and to
actually begin its creation, were Stephen Ross and Barry Mitnick, independently and roughly
concurrently. Ross is responsible for the origin of the economic theory of agency, and Mitnick
for the institutional theory of agency, though the basic concepts underlying these approaches are
similar. Indeed, the approaches can be seen as complementary in their uses of similar concepts
under different assumptions. In short, Ross introduced the study of agency in terms of problems
of compensation contracting; agency was seen, in essence, as an incentives problem. Mitnick
introduced the now common insight that institutions form around agency, and evolve to deal
with agency, in response to the essential imperfection of agency relationships: Behavior never
occurs as it is preferred by the principal because it does not pay to make it perfect. But society
creates institutions that attend to these imperfections, managing or buffering them, adapting to
them, or becoming chronically distorted by them. Thus, to fully understand agency, we need both
streams -- to see the institutional structures as well as the incentives. This paper describes the
origin and early years of the theory, placing its development in the context of other research in
this area.
 3

Origin of the Theory of Agency

Original Papers on Agency

The first scholars to propose, explicitly, that a theory of agency be created, and to
actually begin its creation, were Stephen Ross and Barry Mitnick, independently and roughly
concurrently. Ross is responsible for the origin of the economic theory of agency, and Mitnick
for the institutional theory of agency, though the basic concepts underlying these approaches are
similar. Indeed, the approaches can be seen as complementary in their uses of similar concepts
under different assumptions.

In short, Ross introduced the study of agency in terms of problems of compensation

contracting; agency was seen, in essence, as an incentives problem. Mitnick introduced the now
common insight that institutions form around agency, and evolve to deal with agency, in
response to the essential imperfection of agency relationships: Behavior never occurs as it is
preferred by the principal because it does not pay to make it perfect. But society creates
institutions that attend to these imperfections, managing or buffering them, adapting to them, or
becoming chronically distorted by them. Thus, to fully understand agency, we need both streams
-- to see the incentives as well as the institutional structures.

In economic agency, the problem is one of selecting a compensation system that will
produce behavior by the agent consistent with the principal’s preferences. Thus the focus is on
the nature of the incentive system and the contracting system that guides the distribution of those
incentives, as well as the conditions of risk and information that condition the choices of the
actors. With his typical elegance, Ross laid out the problem with great clarity as well as brevity
in a paper he delivered at the December 1972 economics meeting and which was published in the
AER Proceedings issue in May 1973. He clearly identified the agency problem as generic in
society, not merely as a problem in the theory of the firm. This sets his work apart from the
existing stream on the theory of the firm (e.g., Baumol, 1959; Marris, 1964; Williamson, 1964;
Alchian and Demsetz, 1972) as well as the more general formal approaches on decision making
under risk or uncertainty, and under different information states (e.g., Arrow, 1963; Spence &
Zeckhauser, 1971; Marshak & Radner 1972), though it drew much from this work.

Although Berhold (1971) had referred to agents and principals -- as a number of previous
scholars had done, notably Cooper (1949, 1951) -- and described agent and principal problems,
his work was an extension of the literature stream on incentive contracting and sharecropping.
The task is deciding on sharing compensation between two actors, labeled as agent and principal,
subject to an "appropriate decision" being made by the agent. There is an incentive contract but
no clear relationship of "acting for" between agent and principal; the paper is about sharing
rewards, e.g., sharing profit.

Ross, on the other hand, recast the problem in terms of agency relationships in a theory of
the firm, and, although he used terms employed by Berhold (and did not cite Berhold) clearly
identified the key problem and the key variables. After Ross’s paper, scholars would see agency
problems and incentive mechanism design issues within agency relationships; the frame of
inquiry was refocused.

For Ross, however, the problems are still within the realm of decisions and sequences of
decisions regarding incentives; the contexts that actually constitute the agency relationship are
 4
removed from the analysis and are reduced to their contributions of incentives or contractual
constraints or risk/uncertainty conditions to decisions.

Working independently of Ross, Mitnick followed parallel, if overlapping lines of

literature that were more institutional in character. Barnard (1938) had observed that in the
employment relation supervisors and workers observed a zone of discretion or indifference
within which the worker made key choices. Simon had written about employment as a relation
and with March (1958) had developed an inducements-contributions model that worried
explicitly about managerial issues in the relationship, such as decisions to join and stay in the
relationship. Simon’s work straddled both economics and public administration, and it was not
surprising therefore that, in political science, Clark and Wilson (1961) developed an incentives
model of organizations. Thus both relational and incentives-based arguments had developed
within, or migrated to, the parallel literature.

On the economics side, Williamson’s managerial discretion model (1964) recalled, at

least superficially, some features of Barnard’s old argument about the discretionary zone of
managers’ behaviors, but it introduced an elegant utility tradeoff in which managers could
survive while making allocation decisions that benefitted themselves as well as giving receivers
of profit consequently less than maximal returns. Recalling the classic work of Coase (1937),
Williamson (1975) then introduced a new approach to why hierarchies could be superior to
market contracting. This transaction cost approach suggested that institutions could form because
they were a better means of dealing with such costs, given other conditions such as the nature of
the assets, technology, opportunism, and so on. Williamson’s work completely changed the way
scholars thought about the nature of firms and introduced a new language of terms and logics for
modeling the behavior of firms.

But although Williamson with others applied this approach to the employment relation
(Williamson, Wachter, & Harris, 1975), his transaction costs model (1975, 1985) was based on a
new view of exchange – that is, it was a reformulation of traditional models of market exchange
– and was not really offered as a model of the relationships of hierarchical control. His firms,
though nominally hierarchical and subject to issues of corporate control by the owners, were
understood functionally more in terms of exchanges – transactions – rather than of true
hierarchical behavior in which some actors are modeled as acting for others, often within
structured relationships (vs. exchange relationships; but, again, cf. Williamson’s work on the
employment relationship as well as his older work on managerial discretion). Indeed, one of the
key questions with which Williamson begins is why organizations are ever preferred to markets,
given that market exchange would seem to be capable of doing what organizations do. The
existence of costs of control, however, suggested to Mitnick that a theory of control centered on
agency – not just a theory of exchanges – might generate new insights into common social
institutions.

In a 1965 review of theories of the firm, Alchian remarked in analyzing Williamson

(1964) that “unfortunately for the owners, there are costs of detecting and policing [the
manager’s] actions …. Once these costs are recognized, it is obviously better to avoid some of
these costs if the profits saved are less than the costs” (Alchian, 1965: 35).1 Mitnick realized that
Alchian’s observation was a perfectly general one – that it was true across the host of agency
relationships, not merely as a characteristic of corporate governance. In essence, it would be
productive to create a vertical theory of control as well as a horizontal one of exchange. We are
then led to focus on the mechanisms, and costs, of specifying what the agent is to do, as well as
the costs of observing and policing him or her. The approach becomes vertically relational, as
 5
institutions are created to instruct and manage agents, and to deal with the inevitable (and
sometimes rationally tolerated) imperfections of control.

Like Ross, Mitnick first presented his work in a conference paper, which was given at a
well-attended regular panel of the American Political Science Association Meeting in 1973
(Mitnick, 1973). The APSA does not publish selected papers in a journal issue, as does the AEA,
but it did put the regular panel papers into microfilmed proceedings that were generally available
(as dissertations have been), from what was Xerox University Microfilms and its corporate heirs.

Both Ross and Mitnick were at the University of Pennsylvania (as was Williamson); Ross
was a young faculty member in economics; Mitnick was a doctoral student in political science
interested in public choice, bureaucracy, and political economy.2 Mitnick developed his work on
agency in the Fall of 1972, writing the long paper that became the central analytic part of his
dissertation and his 1973 APSA paper over a period of months up to the 1973 APSA meeting.
After his comprehensive examination in early 1973, Prof. Stephen Elkin asked him what the
topic of his dissertation would be. Mitnick described his agency thesis, and Elkin said that he
should talk to Ross, who had recently presented a paper on what he called the theory of agency.
Mitnick said that he had also come to that name, having studied the law of agency for his paper
and because of simple common usage of the term “agency.”3

Mitnick did not see Ross’s paper until it was published in the May 1973 AER
Proceedings, however. At that point (perhaps June 1973), he did go to speak with Ross, and had
a brief exchange about the difficulty of creating a formal model of “acting for.” Ross had a
wonderful term for it that stuck in Mitnick’s mind – the “ice cream cone problem” – the agent's
problem of selecting what the principal wants without knowing the principal’s preferences. Ross
saw the problem as essentially insoluble as a pure choice problem without greater information on
those preferences. Mitnick believed that institutions and social mechanisms exist to guide such
behaviors. People make decisions based on things like norms, information with social origins,
and what more recent literature terms cognitive heuristics or biases. In essence, information can
be gathered indirectly – or created – to solve or remove the ice cream cone problem. Mitnick put
a brief summary and critique of Ross’s paper in his own 1973 paper since Ross’s paper appeared
before the APSA meeting, but the two works were created quite independently.

Ross’s 1973 paper was tightly focused on the formal analysis of the principal’s problem
of selecting optimal compensation for the agent, and has only the briefest mention of the societal
contexts and relevance of a theory of agency. He published a second conference paper in a
proceedings in 1974 (Ross, 1974) that focused on the formal principle of similarity. In contrast,
Mitnick’s 1973 paper and 1974 dissertation (1974a) presented an extensive study of many
aspects of the theory of agency. It made the case for developing a general theory, presented a
detailed set of agency concepts and sorted them in typologies, identified types of agency
relationships as well as a language for describing agency and for developing theoretical
explanations for behavior in agency, and made a number of applications of agency theory to
specific societal relationships.

For example, Mitnick’s earliest work on agency identified the fiduciary norm as a
common social norm and noted how such norms economized on agency costs.4 It also developed
a theoretical logic about agency in general that permitted the generation of theory in a wide
variety of social contexts. In other words, it actually began developing an institutional theory of
agency. Mitnick presented applications to such social relationships as advisers and clients,
lawyers negotiating with one another, diplomats negotiating with foreign governments and one
 6
another, the behavioral patterns of legislative representatives, the advocacy of interest groups,
regulators as agents subject to policing by public observers, regulatory incentive systems (with a
specific application to regulation of power plant siting), and so on. He took the Clark and Wilson
(1961) incentive system model and modified it to make it systematic and applicable to agency
relationships.

It was not unusual in the formal work on economic agency that developed over the
following years to see a focus on normative theory: For example, researchers asked such
questions as, is there an optimal fee schedule that would align the agent and principal under
certain conditions? Approaches of this type often seek to derive general principles from
assumptions about initial conditions, abstract relationships among variables, and so on, via
formal proofs. Having derived the principle, some researchers may then search for empirical
evidence consistent with the abstract result. In contrast, from the beginning Mitnick’s
institutional approach focused on developing the core theory logics of agency that made it
possible to generate statements about behavior in the real world, i.e., descriptive theory: How can
we explain a series of diverse but commonly observed contexts of agent-principal relationships
using the logics of agency theory? For example, under what conditions are lawyers, acting as
agent-advocates in conflict, more or less likely to reach settlement? Why do critics of the
performance of public agencies focus on preventing self-enriching behavior by public employees
–public agents -- rather than on the problem itself, relatively poor outcomes for the public
interest? This emphasis on descriptive theory continued over the years. For example, Mitnick’s
more recent theory of testaments (Mitnick, 1996/1998, 1999, 2000, 2009; Mitnick & Ryan,
2012), a component of his institutional agency approach, addresses such questions as, why do
selective colleges limit the number of recommendation letters from applicants? Why do
organizations prefer to hire imperfectly trained employees? Why do incumbents have advantages
that challengers do not, and what factors generate greater advantage than others? All of these
apparently diverse circumstances can be understood by applying the logics of institutional
agency theory.

The first regular, non-proceedings journal article in social science on agency as a general
theoretical approach was published by Mitnick (1975b) in Public Choice in the Winter 1975
issue (end of 1975; the 1973 APSA and 1975 Public Choice papers may be downloaded from
Mitnick’s SSRN site [Link] the 1975 paper has corrections to a few
printing errors in the original). Heckerman (1975), applying Ross (1973), was published the
same year. The first non-proceedings journal article with an agency theory application in it was
by Mitnick and Weiss (1974), which had a small application of agency in Mitnick’s extension of
Roger Noll’s (1971) regulator incentives model. The widely cited and extremely influential work
by Jensen and Meckling (1976) that proposed an agency theory of the firm was not published
until almost a year later than Mitnick’s theory article in Public Choice and two years after
Mitnick’s application of agency to regulator incentives. In 1976 Mitnick published another
article (1976b) that made use of his agency approach, this time applied to agency in the public
sector, specifically in the context of the public interest and the use of public interest rhetoric in
advocacy.5 Mitnick also presented several papers on agency during this period. He was invited
by Oliver Williamson to present parts of his dissertation at Williamson's Organizations
Workshop in October 1974 (Mitnick, 1974b). He also presented papers on agency at the
American Sociological Association meetings in 1975 and 1976 (Mitnick 1975a, 1976a).

Mitnick's dissertation was chaired by Russell Hardin, one of the leading political
philosophers in the world; Mitnick was his first doctoral student. His dissertation defense was
chaired by the distinguished political scientist Edward C. Banfield, and his committee also
 7
included Stephen Elkin, who is one of the founders of a prominent organization of political
economists in the U.S. Mitnick considers himself very fortunate to have had the benefit of such
mentors, who also included Robert W. Backoff, a brilliant scholar of public administration and
social scientist, and Charles D. Elder and Roger Cobb, whose work literally set the agenda for
research in public policymaking.

At Mitnick's dissertation defense in the Spring of 1974, Banfield asked if this theory of
agency might be applied to analyze corruption. Mitnick responded with a discussion of how it
could, indeed, be so used. Banfield then wrote a paper comparing public and private which used
Mitnick’s general approach to agency theory to argue how agency in public organizations can
produce endemic corruption. Banfield's paper (Banfield, 1975) was the lead paper in a 1975
NBER conference and was published in the Journal of Law and Economics late that year in a
special issue. Banfield asked Mitnick to review the manuscript of the paper, and Mitnick
suggested a number of corrections, which Banfield adopted. Banfield acknowledged Mitnick and
his agency theory in the version published in the Journal of Law and Economics, but the draft
paper for the conference did not contain the acknowledgments. Thus, although a large group of
prominent economists were introduced to institutional agency theory at the conference, it is not
known if any were aware that the work they heard was stimulated and informed significantly by
Mitnick's work.6

Thus, by the time the classic paper by Jensen and Meckling appeared in print in late
1976, Ross's economic theory of agency was widely known in economics, and Mitnick's
institutional theory of agency had been published as theory and/or applications in three articles,
used in a fourth by another scholar, and been presented at major meetings in three of the social
sciences: economics, political science, and sociology. Although Jensen and Meckling (1976) has
had enormous influence in the literature – it is easily the most frequently cited paper using
agency theory, its occasional citation as the primary originating paper in agency theory is
incorrect. Indeed, it actually originated a variant of an agency theory of the firm, not agency
theory in general. Moreover, Jensen and Meckling (1976) did not claim to have originated the
approach, citing other works (see their footnote 7).

Evolution and Spread of Agency Theory

The first application of Ross (1973) was Heckerman (1975), who used Ross's economic
theory of agency approach to model the creation of a compensation contract that would motivate
a manager to make investment decisions in the interest of the owner. Interestingly, Heckerman
thanks the editor of the Journal of Financial Economics, Michael Jensen, who would become the
coauthor of the most highly cited work on the agency theory of the firm (Jensen and Meckling
1976).

Of course, the theory of agency did not appear, whole cloth, in the works of Ross and
Mitnick in 1973. As noted above, key concepts were developed by scholars in economics,
political science, and elsewhere in a variety of streams on the firm, on organizations, and on
incentives and information, and were later incorporated into the agency approach. In addition,
agent-principal language was employed in a number of works across the social sciences well
before an explicit theory of agency was proposed. Thus it is important to both acknowledge the
earlier work and recognize that it waited for the primary work by Ross and by Mitnick for the
frame of reference to center on agency theory per se.

For example, in the accounting and control literature, Cooper (1949, 1951) discussed
 8
agents inside the firm; in economics Downs (1957) referred to agents in his economic theory of
democracy and Arrow (1963) referred to agents and to delegation to agents in his discussion of
characteristic problems in medical care and the response of institutions to those problems; in
political science, Pitkin (1967) and Tussman (1960) used agent-principal language in works on
political philosophy; and, in sociology, Swanson (1971) described collective society using such
terms.7 But in none of these works or in any other before Ross and Mitnick was there an explicit
proposal for, or an actual theory of, agency.

As noted earlier, in a stream of literature on incentive contracting that had developed out
of the analysis of contracting in the defense industry, Marvin Berhold (1971) offered a formal
model of profit-sharing incentives that used agent-principal language, including agent, principal,
agent's problem, and principal's problem, which were terms also used by Ross (1973), who did
not cite Berhold (1971). In Berhold's formal model, the “principal” sets a fixed reward and the
degree of sharing of a variable reward with the “agent.” The agent is offered an incentive-sharing
contract that the principal hopes the agent will make a decision to accept. The basic logic is
similar to that in the sharecropping literature. Despite the terms used, the paper is really an
incentive model not a model of relational agency because there is no actual agency relationship
built into the model, which focuses on acceptable sharing; the model is not actually set up as a
relational model to reflect that the agent is acting for the principal. The logic of control loss is
also missing, i.e., how the principal's specification, monitoring, and policing costs affect the
relationship. The major question is whether the sharing of rewards will be acceptable to the
parties, i.e., influence the agent's decision to accept, given risk and the incentive contract. At the
time, there was already a long history of work on incentive systems (Berhold (1971) cites
Barnard (1938), for example; Clark and Wilson (1961) and others, including March and Simon
(cf. their "inducement-contributions" model, 1958; Simon, 1945) had also developed incentives
models). Later the theory of agency itself would be conflated with a theory of incentives (e.g.,
Gibbons, 1998, 2005; Sappington, 1991); they are not the same. Incentives are an important part
of any theory of agency, but the theory of agency is not a theory of incentives. Thus, Berhold
presented a formal model of reward-sharing in an incentive contract, not an actual relational
theory of agency. As earlier noted, by the end of 1972, a number of scholars had employed
agent-principal language, but none had proposed or actually began development of a theory of
agency.

In the early 1970s, agency theory was, of course, unknown in political science and
sociology before Mitnick, and it was not possible to publish articles with this theory logic in
journals in these fields. Reviewers wrote that they had never seen anything like it, and thus it
clearly was not sociology or political science. Ironically, Susan Shapiro’s superb article on
interpersonal trust (Shapiro, 1987), the first published piece that introduced agency concepts to
sociology, and which made use of some of Mitnick’s work, was published in the American
Journal of Sociology in 1987, twelve years after the same journal rejected one of Mitnick’s major
papers on agency as foreign to sociology (for Shapiro's work using the theory of agency, see
also, e.g., Shapiro, 2005, 2016).

As a result, Mitnick published his work on agency in articles and books nominally
focusing on other topics. As noted above, he used an agency approach in analyzing the
incentives of regulators (Mitnick & Weiss 1974; Mitnick 1980c; Mitnick 1982b; Mitnick, 1991;
Mitnick, Verma, & Marcus, 1999; see also Mitnick & Backoff, 1984, for a general model of the
incentive relation and an application to incentives in implementation) and in part of his paper on
the public interest in 1976. He applied agency to a variety of contexts in regulation (e.g., Mitnick
 9
1978, note 9; Mitnick 1982a), including interest group behavior and regulation (Mitnick 1980a),
and common problems in political institutions (Mitnick, 1984). Among other applications of
agency theory, his 1980 book, The Political Economy of Regulation (1980b), introduced the
study of delegation as the creation of agents in government.8 His edited book on Corporate
Political Agency (1993a) included both applications of agency theory and basic theory about
agency relationships developed in the context of corporate political activity.

In a series of papers (Mitnick,1996/1998, 1999, 2000, 2009; Mitnick & Ryan, 2012; this
stream continues), Mitnick addressed questions associated with the formation of agency
relationships, developing an approach called the theory of testaments (on the rationales for
creating agency relationships, see Mitnick 1993b). In order to join relationships, including to be
employed in organizations, agents present statements about their qualities. These include reports
about their past, claims about the present, and predictions about the future. Principals in the
relationship then apply, respectively, logics of verification of the past, validation of the present,
and confirmation of the future. Agents have incentives to mobilize such statements; principals
have incentives to economize on the costs of these assessment processes. In general, on the basis
of their relative credibility, principals prefer reports to claims to predictions. Agents understand
these processes, and so processes of incorporation in relationships tend to be structured by these
logics. The theory of testaments thus allows us to predict a host of behaviors associated with
such relationship formation.

Critical Reaction and Revisionist Approaches to Economic Agency Theory

The dominance of the economics stream of agency theory has drawn criticism for the
stream's limited assumptions, logics, and domain of explanation. The model of economic agency
has been criticized as simplistic and poorly descriptive of common organizational behavior (e.g.,
Ghoshal, 2005; Perrow, 1986; Spender, 2011; Hirsch, Michaels, & Friedman, 1987; Lubatkin,
2005; Lubatkin et al., 2007; cf. Husted, 2007). Scholars have noted that the agency theory of the
firm (e.g., Dalton et al., 2007) associated with Jensen & Meckling (1976) also presents a false
picture of the legal status of the corporation in the U.S. (e.g., Blair & Stout, 2001, 2008;
Heracleous & Lan, 2012; Kaufman & Englander, 2005; Lan & Heracleous, 2010; Stout, 2012).
Its reliance on the self-interest assumption has led some scholars to posit models in which
"stewardship" rather than self-interested agency done instrumentally on behalf of shareholders,
has a primary role (Donaldson, 1990; Davis, Schoorman, & Donaldson, 1997).

Work aiming to repair some of these faults, while still operating within what is
recognizably the economic theory of agency appeared. The "behavioral" theory of agency still
emphasized risk-taking in agency (Wiseman & Gomez-Mejia, 1998). Ignoring the original work
on institutional agency that did not presume self-interest, some scholars asserted that their work
would finally expand such motivational limitations and allow both self- and other-interests
(Wiseman, Cuevas-Rodriguez, Gomez-Mejia, 2012; Cuevas-Rodriguez, Gomez-Mejia, &
Wiseman, 2012; Martin, Wiseman, & Gomez-Mejia, 2016). Other scholars claimed to introduce
ethical and social norms to the motivational calculus of actors (e.g., "bounded self-interest"
affected by norms of reciprocity and fairness; Bosse & Phillips, 2016; Bosse, Phillips, &
Harrison, 2009), and wrote that they were introducing social norms to agency, despite their
having been employed in the original institutional agency approach over thirty years earlier
(Casadesus-Masanell, 2004; Casadesus-Masanell & Spulber, 2005; Lubatkin, 2005; Lubatkin et
al., 2007; but see Stinchcombe, 1986 (originally 1975), who realized the importance of the norms
 10
of agency early in the development of the institutional approach). (On these trends, see Mitnick,
2019.)

The power of focusing on institutional rather than on decision-centered models concerned

with who controls what kind of decisions (e.g., Fama and Jensen, 1983a, 1983b) and/or how the
compensation contract is structured so it becomes rational for the agent to decide to behave as
the principal wants (e.g., Ross, 1973; Heckerman, 1975) becomes clear in such contexts as the
hiring of new employees by organizations. The basic logic of agency would predict that the
organization would seek to hire the agent closest to perfect, with resource commitment to that
end stopping when the marginal costs of acquiring perfection begin to exceed the marginal gains
from perfection. But although the theory of testaments can now help inform, descriptively, what
actually happens as agents join, we also need to understand that organizations with embedded
agency relationships behave in fundamentally different ways from simple agency; an
organization is not best understood as a “nexus” of contracted agency relationships, as Jensen
and Meckling (1976) describe it. If we accept that organizations are merely collections of
contracted agency relationships, we have lost some of the original fundamental insights of
Williamson regarding the differences, from the perspective of exchange, between organizations
and markets.

Indeed, organizations should not seek to hire the most perfect agents it pays them to hire,
even for tasks to be done at the time of hire (Mitnick, 1994b). Organizations exist to provide
adaptive instructions to constituent agents over the life of the organization; investing in
perfection at time 1 does not necessarily get you perfection at time 2. Nor even is investment in
perfection in hiring at time 1 necessarily the most efficient solution to the problem of getting
more perfect behavior at time 1. It can be cheaper and more effective to let the organization
direct the imperfect agent than to let the (costly-to-acquire) near-but-not-perfect agent direct him
or herself. There is clearly an optimization problem embedded here that replaces the logic of
simple agency.

Organizations do not rely solely on the basic economizing logic of agency. Because
organizational processes are dynamic, changing in response to such factors as technological
innovation and new competitive demands, organizations prefer to hire relatively imperfect agents
and to train them and to specify their behaviors dynamically, adapting incrementally to the
demands of organizational production and environmental change. Indeed, systems already in
place to direct/correct agency behaviors can shape the behavior of imperfect agents immediately
after joining the organization. Organizations are not static collections of administered contractual
relationships; they are synergistic systems that exist as organizations precisely because simple,
accumulative contracting won’t work to optimally achieve the purposes of the organization. This
is not to say that agency logics become foreign to the analysis -- but they operate differently.

For example, assessment of employment applicants follows the logic of testaments, as

noted above. But once inside the organization, observations (and reports of observations, of
course) of actual behaviors can supplant reports of past behaviors not observed by organizational
managers. In organizational contexts, the problem of adverse selection (Arrow, 1985) is actually
two related but different problems: The first is the problem of adverse claims, understood using
the logics of testaments, and encountered in organizational joining. The second is the problem of
adverse performance, understood using the logics of agency control and agency embedding, and
encountered in ongoing monitoring of agents engaged in both adaptive processes and potentially
deceptive joint production (Mitnick, 1994a).
 11
Agency did not enter political science in a major way until Moe's article in 1984 (Moe,
1984); did not enter sociology similarly until Shapiro's article in 1987; and did not become
prominent in management work until after Eisenhardt's article in 1989. Note that Eisenhardt’s
article appeared sixteen years after Mitnick’s original paper. In all cases, Mitnick's work was
cited, but it had appeared so many years before that these authors took their primary direction
from the then-popular streams on agency in economics. Moe had been aware of Mitnick's work
as long ago as 1978 when Mitnick had a job interview at Moe’s department and met with him.
Shapiro had many of Mitnick's papers and did make use of them in her important article.
Eisenhardt also had many of Mitnick's papers, including his original papers, but apparently did
not consult them and actually cited a paper by Mitnick mistakenly as an application in political
science, which it was not -- it was a paper in management (i.e., organization theory; Mitnick
1992/1986). Her widely-cited article presented the intellectual history of agency theory
incorrectly, including its origination. Mitnick's original work on agency has of course been cited
(e.g., Cook, 1982; Galaskiewicz,1985; Spulber, 1989; Spulber & Besanko, 1992; Macey, 1992;
Waterman & Meier, 1998; Krause, 1999; there are many more), but it has remained less known,
especially in economics in the streams that originated with Ross and that grew out of the work of
Jensen and Meckling.

In a major critical assessment in the Annual Review of Sociology, Shapiro (2005: 4.9,
4.12) wrote that “a general theory of agency emerged in political science (Mitnick, 1973) at the
same time that it did in economics (Ross, 1973), apparently independently. … In a series of
papers spanning at least 25 years, political scientist Barry Mitnick broke the monopoly on
agency theory enjoyed by the economics paradigm and offered an alternative to the assorted
baggage that comes with it.” Mitnick (2019) argues that it is past time for "the theory of agency
redux" -- that the original institutional stream in agency did not have many of the limitations
imposed by the economic theory of agency, and that it promises to provide valuable insights into
the management of the essentially imperfect yet ubiquitous societal relationships of agency.

Mitnick continued to publish work using agency as a key theory logic, and to expand the
theory itself.9 He secured a contract from Cambridge University Press to publish his work on
agency.10

The literature’s uncertainty about the origins of agency theory is reflected in the fact that
there is no standard citation to its origin. When work using transaction costs is done, for
example, Oliver Williamson is cited appropriately as its modern originator. When applications of
agency theory are published, however, citations are inconsistent: Sometimes Jensen and
Meckling (1976) is cited, although what they originated was an influential application to the
theory of the firm, not the agency approach itself. Sometimes, though not always, Ross (1973) is
cited, although he deserves to be in every first footnote because of his critical role in originating
economic agency theory. Mitnick (1973, 1975b) is cited far less frequently, although he
originated the institutional theory of agency, including some of agency theory’s most basic and
familiar concepts and logics, and was the first to actually make explicit applications of agency
theory to social institutions.

Often there are citations to scholars who advanced agency theory or who made
contributions using agency in the field of the application. Sometimes there are citations to
outstanding scholars who made basic contributions to some of the core logics that are frequently
applied in analyses of agency relationships, such as formal analyses of the behaviors or effects of
risk distributions, incentive systems, control failures, and the like (e.g., Spence & Zeckhauser,
1971; Holmström, 1979). Indeed, there is an extensive history of work on such topics. In a
 12
surprising number of cases, however, there is no citation at all, as if after almost forty years the
concepts of agency had passed into the common language of scholarship. The key argument
missing from all earlier work is that a general, powerful theory that applies to agency
relationships should be developed, and that such a theory can generate statements about
behaviors across the institutional settings of this type, not merely in one case such as the business
firm.

After Ross (1973), people thought in terms of modeling compensation contracts that
constituted economic agency relationships, not just in terms of relatively stand-alone incentives
or compensation systems, which were indeed a central part of Ross’s analysis, and which many
scholars had, of course, written about in the past and continued to write about in the context of
agency theory. But for many, the frame had changed, dramatically, as a positive theory of
economic agency, focused as a theory of the firm, developed. Part of the logic of agency costs,
including the adaptation of institutions to agency failures that may be rationally tolerated or
worked around, can now be inferred, for example, in brief remarks in Alchian’s (1965) and
Alchian and Demsetz’s (1972) works on the firm, but there is no recognition of the logic of
agency costs as a general component of the understanding of how agency institutions in general
are designed and function until Mitnick’s work. No one had offered that a theory of agency,
utilizing, combining, extending, and applying insights that had appeared across literature in
economics, public administration, and political science regarding such relationships would be a
powerful, new way of viewing a very large class of social phenomena until Ross and Mitnick
proposed just that.

Thus, by the logic of discovery, Mitnick's origination of agency is anchored in his

original creation of the proposal to create a major, integrating theory with this focus, and to
actually begin that work, with both presentations and publications of record. For years after it
appeared, there was nothing in the literature that even remotely approached the explicit and
extensive applications that were in his early papers and publications. His work was by far the
first to introduce and develop many of the key institutional arguments by which we know it
today, e.g., the argument that institutions may be shaped by the rational choice of the principal to
not create perfect agency, when such creation would not be worth it. He also was the first to
publish a non-proceedings article in a regular social science journal explicitly on the theory of
agency. And the record is clear that his work was spread even in its early days across three of the
social sciences.

Notes

Author’s note: This piece was written in third person because I thought it less intrusive than
constant first person references, though I don’t think there is a comfortable way to do this when
one is writing about one's own work.

1. A similar argument appears in Alchian and Demsetz (1972), but in the context of monitoring
team production in the firm, not as a feature of a generalized agency model. Mitnick’s insight
was generated by the 1965 remark. In a particular context, Ross (1973) notes it may not be
“economically viable” to monitor the agent, but this is not the same as offering the argument as a
general way to understand how institutions manage agency.

2. Mitnick was also trained partly in economics, auditing the same year-long sequence in
 13
microeconomics taken by the economics doctoral students. Because he was doctoral student in
political science, he took a parallel independent study in political science for a term that received
the economics grade. Two of his major professors were physically located in the Fels School,
where Oliver Williamson was also located, and Mitnick had access to Williamson's working
papers in the Fels series and could attend seminars there.

3. Although the law of agency had a role in the naming of the theory of agency and its concepts
were employed in the original development of agency theory by Mitnick, it would be many years
before other scholars also applied materials from the law of agency to the social science theory
of agency (see Robert Clark’s (1985) chapter in the Pratt and Zeckhauser (1985) volume). There
is a very large literature now in law that makes use of the theory of agency or key concepts from
it.

4. Cf. the much later work of Easterbrook and Fischel (1991, 1993), who have sometimes been
credited with originating this view, but in fact did not; also see the original and creative work of
Stinchcombe (1986/1975) on the fiduciary norm, as well as related discussions by Arrow (1963)
on trust and delegation in medical care and by Alchian and Demsetz (1972) on the functions of
“loyalty.”

5. This article was later incorporated into Mitnick’s 1980 book on regulation as part of chapter
four.

6. All of Mitnick’s presentations during 1973-1976, in all three disciplines, economics, political
science, and sociology, were on very well attended panels. Those in political science and
sociology were standing-room-only; Richard Emerson attended one of the sociology
presentations, corresponded briefly with Mitnick, had Mitnick’s papers on agency, and later
wrote a paper using agency. Many leading economists/social scientists attended the NBER
conference at which Banfield's paper (1975) applying Mitnick's theory of agency was presented
and later published in the conference volume in the Journal of Law and Economics (e.g., George
J. Stigler, James Buchanan, Gordon Tullock, Mancur Olson, Karl Brunner, William A. Niskanen.
William M. Landes, M.W. Reder, Jerome Rothenberg, Richard A. Posner, Allen H. Meltzer,
Warren J. Samuels, Robert J. Gordon, Gerald H. Kramer, Vincent Ostrom, and others).
Consequently, knowledge of Mitnick’s original work in agency was introduced relatively widely
at that time, and to key audiences. Besides the meeting presentations, Mitnick gave at least
sixteen job interview presentations at research universities during the 1973-74 and 1977-1978
academic years. Thus, knowledge of his work on agency was spread fairly widely in the
academic community, a fact not generally realized today.

7. In 1976, the economist Victor Goldberg (1976) published an important article in the Bell
Journal of Economics that was based on a long and creative working paper that employed
agency language. Goldberg’s insight was to view the regulator's problem as having to serve as
agent both for consumers and for producers. He exchanged papers with Mitnick and then
referenced the theory of agency explicitly in his 1976 article, citing Mitnick's papers.

8. The political scientist Morris Fiorina read Mitnick's book (1980b; see especially chapter 6, pp.
326-337) while moving his research focus beyond legislatures (personal communication from
Fiorina about 1981; Fiorina discussed this with Mitnick during a walk they took at the American
Political Science Association meeting) and published a widely-cited article (Fiorina, 1982) on
delegation as agency that generated a whole subfield of work. Unfortunately, Fiorina did not
appropriately cite the contributions of the original source, though a comparison of the two works
 14
shows the similarity of the basic ideas immediately. Most scholars who have done work in this
field believe incorrectly that Fiorina's discussion of delegation as agency originated this
approach (but see, e.g., Macey, 1992). But no one in political science had used this language and
approach before Mitnick, and Fiorina was indeed familiar with Mitnick’s writing on agency,
delegation, and regulation.

9. Mitnick’s first academic position (1974) was in what was then called the School of Public
Administration at Ohio State University, where most of the senior faculty were interested more
in applied work in public administration than in abstract social science theory. In 1978, Mitnick
moved to what is now the Katz Graduate School of Business at the University of Pittsburgh,
where he was hired to teach and do research in regulation and in business and society, two areas
that continue to figure in his work.

Still, most of the research Mitnick did over the years employed aspects of the institutional
agency theory that he had pioneered, and his applications of it included areas of relevance to his
academic setting as well as more general contexts (e.g., Mitnick, 1993a). For example, as already
noted, a more recent addition to the theory is the theory of testaments (1996/1998), which seeks
to explain the conditions under which the performance claims of prospective agents will be
treated as credible, so that the agents will be incorporated by or into the principal actor or
organization. Mitnick has so far made applications of this to the theory of the state (Mitnick,
1999), the metrics of corporate social performance (Mitnick, 2000), corporate governance
(Mitnick, 2009), sensemaking and social proof (Mitnick & Ryan, 2012), and other areas.

10. Work on this book continues.

References

Alchian, A. A. 1965. The basis of some recent advances in the theory of management of the firm.
Journal of Industrial Economics (November), 14(1): 30-41.

Alchian, A. A., & Demsetz, H. 1972. Production, information costs, and economic organization.
American Economic Review (December), 62(5): 777-795.

Arrow, K. J. 1963. Uncertainty and the welfare economics of medical care. American Economic
Review (December), 53(5): 941-973.

Arrow, K. J. 1985. The economics of agency. In J. W. Pratt, & R. J. Zeckhauser (Eds.), Principals and
agents: The structure of business: 37-51. Boston, MA: Harvard Business School Press.

Banfield, E. C. 1975. Corruption as a feature of governmental organization. Journal of Law and

Economics (December), 18(3): 587-605. See also comments by M.W. Reder and S.
Rottenberg, 607-615.

Barnard, C. I. 1938. The functions of the executive. Cambridge, MA: Harvard University Press.

Baumol, W. J. 1959. Business behavior, value and growth. New York: Macmillan.

Berhold, M. 1971. A theory of linear profit-sharing incentives. Quarterly Journal of Economics,

85(3): 460-482. DOI: 10.2307/1885933
 15

Blair, M. M., & Stout, L. 2001. Trust, trustworthiness, and the behavioral foundations of corporate law.
University of Pennsylvania Law Review, 149: 1735-1810.

Blair, M. M., & Stout, L. A. 2008. A team production theory of corporate law. Virginia Law Review,
85(2): 247-328.

Bosse, D. A., & Phillips, R. A. 2016. Agency theory and bounded self-interest. Academy of
Management Review, 41(2): 276-297. [Link]

Bosse, D. A., Phillips, R. A., & Harrison, J. S. 2009. Stakeholders, reciprocity, and firm
performance. Strategic Management Journal, 30: 447-456. DOI: 10.1002/smj.74

Casadesus-Masanell, R. 2004. Trust in agency. Journal of Economics and Management

Strategy, 13(3): 375-404.

Casadesus-Masanell, R., & Spulber, D. F. 2005. Trust and incentives in agency. Southern
California Interdisciplinary Law Journal, 15(1): 43-103. Available at
SSRN: [Link]

Clark, P. B., & Wilson, J. Q. 1961. Incentive systems: a theory of organizations. Administrative
Science Quarterly (September), 6: 129-166.

Clark, R. C. 1985. Agency costs versus fiduciary duties. In J. W. Pratt & R. Zeckhauser, eds.,
Principals and agents: The structure of business. Boston, MA: Harvard Business
School Press, 55-79.

Coase, R. H. 1937. The nature of the firm. Economica n.s. 4: 386-405. Reprinted in G.J. Stigler
& K.E. Boulding, eds., Readings in price theory. Chicago: Richard D. Irwin for the
American Economic Association, 1952.

Cook, K. 1982. Network structures from an exchange perspective. In P. V. Marsden & N. Lin,
eds., Social structure and network analysis. Beverly Hills, CA: Sage Publications, 177-
199.

Cooper, W. W. 1949. Theory of the firm: Some suggestions for revision. American Economic Review,
39(6): 1204-1222.

Cooper, W. W. 1951. A proposal for extending the theory of the firm. Quarterly Journal of Economics,
65(1): 87-109.

Cuevas-Rodriguez, G., Gomez-Mejia, L. R., & Wiseman, R. M. 2012. Has agency theory run its course?
Making the theory more flexible to inform the management of reward systems. Corporate
Governance: An International Review, 20(6): 526-546.

Dalton, D. R., Hitt, M. A., Certo, S. T., & Dalton, C. M. 2007. The fundamental agency problem
and its mitigation. The Academy of Management Annals, 1(1): 1-64.
[Link]
 16
Davis, J. H., Schoorman, F. D., & Donaldson, L. 1997. Toward a stewardship theory of
management. Academy of Management Review, 22(1): 20-47.
[Link]

Donaldson, L. 1990. The ethereal hand: Organizational economics and management theory.
Academy of Management Review, 15: 369-381.
[Link]

Downs, A. 1957. An economic theory of democracy. New York: Harper and Row.

Easterbrook, F. H., & Fischel, D. R. 1991. The economic structure of corporate law. Cambridge:
Harvard University Press.

Easterbrook, F. H., & Fischel, D. R. 1993. Contract and fiduciary duty. Journal of Law &
Economics, 36(2): 425-446. [Link]

Eisenhardt, K. M. 1989. Agency theory: An assessment and review. Academy of Management

Review (January), 14(1): 57-74.

Fama, E. F., & Jensen, M. C. 1983a. Agency problems and residual claims. Journal of Law and
Economics, 26(2): 327-349.

Fama, E. F., & Jensen, M. C. 1983b. Separation of ownership and control. Journal of Law and
Economics, 26(2): 301-325.

Fiorina, M. P. 1982. Legislative choice of regulatory forms: Legal process or administrative

process? Public Choice (September), 39: 33-66.

Galaskiewicz, J.. 1985. Social organization of an urban grants economy: A study of business
philanthropy and nonprofit organizations. Orlando, FL: Academic Press.

Ghoshal, S. 2005. Bad management theories are destroying good management practices.
Academy of Management Learning & Education, 4(1): 75-81.
[Link]

Gibbons, R. 1998. Incentives in organizations. Journal of Economic Perspectives, 12: 115-132.

Gibbons, R. 2005. Incentives between firms (and within). Management Science, 51(1): 2-17.

Goldberg, V. P. 1976. Regulation and administered contracts. Bell Journal of Economics

(Autumn), 7(2): 426-448.

Heckerman, D. G. 1975. Motivating managers to make investment decisions. Journal of Financial

Economics, 2: 273-292.

Heracleous, L., & Lan, L. L. 2012. Agency theory, institutional sensitivity, and inductive
reasoning: Towards a legal perspective. Journal of Management Studies, 49(1): 223-
239. [Link]
 17
Hirsch, P., Michaels, S., & Friedman, R. 1987. "Dirty hands" versus "clean models": Is sociology in
danger of being seduced by economics? Theory and Society, 16(3): 317-336.

Husted, B. W. 2007. Agency, information, and the structure of moral problems in business.
Organization Studies, 28(2): 177-195.

Holmström, B. 1979. Moral hazard and observability. Bell Journal of Economics (Spring), 10(1): 74-
91.

Jensen, M. C., & Meckling, W. H. 1976. Theory of the firm: Managerial behavior, agency costs
and ownership structure. Journal of Financial Economics (October), 3(4): 305-360.

Kaufman, A., & Englander, E. 2005. A team production model of corporate governance.
Academy of Management Executive, 19(3): 9-22.
[Link]

Krause, G. A. 1999. A two-way street: The institutional dynamics of the modern administrative
state. Pittsburgh, PA: University of Pittsburgh Press.

Lan, L. L., & Heracleous, L. 2010. Rethinking agency theory: The view from law. Academy of
Management Review, 35(2): 294-314. [Link]

Lubatkin, M. 2005. A theory of the firm only a microeconomist could love. Journal of Management
Inquiry, 14(2): 213-216.

Lubatkin, M., Lane, P. J., Collin, S., & Very, P. 2007. An embeddedness framing of governance and
opportunism: Towards a cross-nationally accommodating theory of agency. Journal of
Organizational Behavior, 28(1): 43-58.

Macey, J. R. 1992. Organizational design and political control of administrative agencies.

Journal of Law, Economics, and Organization (March), 8(1): 93-110.

March, J. G., & Simon, H. A. 1958. Organizations. New York: Wiley.

Marris, R.. 1964. The economic theory of "managerial" capitalism. Glencoe, IL: Free Press of
Glencoe.

Marschak, J., & Radner, R. 1972. Economic theory of teams. New Haven, CT: Yale University
Press.

Martin, G. P., Wiseman, R. M., & Gomez-Mejia, L. R. 2016. Bridging finance and behavioral
scholarship on agent risk sharing and risk taking. Academy of Management
Perspectives, 30(4): 349-368. [Link]

Mitnick, B. M. 1973. Fiduciary rationality and public policy: The theory of agency and some
consequences. Paper presented at the 1973 Annual Meeting of the American Political
Science Association, New Orleans, LA. In Proceedings of the APSA, 1973 (formerly
available from Xerox University Microfilms and, later, UMI Serials).

Mitnick, B. M. 1974a. The theory of agency: The concept of fiduciary rationality and some
 18
consequences. Unpublished Ph.D. dissertation, Department of Political Science,
University of Pennsylvania. Univ. Microfilms No. 74-22,881.

Mitnick, B. M. 1974b. A typology of goals for positive theories: The theory of agency and the
incentive systems approach to organizations. Paper presented at Professor Oliver
Williamson's Organizations Workshop, Fels Center of Government, University of
Pennsylvania (October 24, 1974). College of Administrative Science Working Paper
Series, WPS 75-45 (Ohio State University, October 1975).

Mitnick, B. M. 1975a. The theory of agency: The fiduciary norm. Paper presented at the 1975
Annual Meeting of the American Sociological Association, San Francisco, CA; College
of Administrative Science Working Paper Series, WPS 75-7 (Ohio State University,
March 1975).

Mitnick, B. M. 1975b. The theory of agency: The policing "paradox" and regulatory behavior.
Public Choice (Winter), 24: 27-42.

Mitnick, B. M. 1976a. The theory of agency: A framework. Paper presented at the 1976 Annual
Meeting of the American Sociological Association, New York, NY; College of
Administrative Science Working Paper Series, WPS 75-17 (Ohio State University, June
1975).

Mitnick, B. M. 1976b. A typology of conceptions of the public interest. Administration and

Society, 8(1): 5-28. [Link]

Mitnick, B. M. 1978. Deregulation as a process of organizational reduction. Public Administration

Review, 38(4): 350-357.

Mitnick, B. M. 1980a. Myths of creation and fables of administration: Explanation and the strategic use
of regulation. Public Administration Review, 40(3): 275-286.

Mitnick, B. M. 1980b. The political economy of regulation: Creating, designing, and removing
regulatory forms. New York: Columbia University Press.

Mitnick, B. M. 1980c. Incentive systems in environmental regulation. Policy Studies Journal,

9(3): 379-394. DOI: 10.1111/j.1541-0072.1980.tb00947.x

Mitnick, B. M. 1982a. Regulation and the theory of agency. Review of Policy Research [was
Policy Studies Review], 1(3): 442-453. [Link]
1338.1982.tb00448.x

Mitnick, B. M. 1982b. The two-part problem of regulatory compliance: The case of compliance reform
and strip mining. In L. E. Preston, ed., Research in Corporate Social Performance and Policy:
A Research Annual, Vol. IV: 215-242. Greenwich, CT: JAI Press.

Mitnick, B. M. 1984. Agency problems and political institutions. Paper presented at the 1984
Annual Meeting of the Midwest Political Science Association, Palmer House, Chicago,
IL, April 12-14. Available at SSRN: [Link]

Mitnick, B. M. 1991. An incentive systems model of the regulatory environment. In M. J. Dubnick, &
 19
A. R. Gitelson (Eds.), Public policy and economic institutions, Vol. 10: 147-204. Greenwich,
CT: JAI Press.

Mitnick, B. M. 1992/1986. The theory of agency and organizational analysis. In N. Bowie, & R. E.
Freeman (Eds.), Ethics and agency theory: 75-96. New York: Oxford University Press.
Available at SSRN: [Link]

Mitnick, B. M., ed. 1993a. Corporate political agency: The construction of competition in
public affairs. Newbury Park, CA: Sage Publications.

Mitnick, B. M. 1993b. Strategic behavior and the creation of agents. In B.M. Mitnick (ed.),
Corporate political agency: The construction of competition in public affairs, 90-124.
Newbury Park, CA: Sage Publications. Accepted by Academy of Management Review;
may also be found cited under the title "Strategic risk reduction and the creation of
agents;" withdrawn by the journal due to passage of time.

Mitnick, B. M. 1994a. The hazards of agency. Paper presented at the 1994 Annual Meeting of the
American Political Science Association, New York, NY, September 1-4. Available at SSRN:
[Link]

Mitnick, B. M. 1994b. Delegation of specification: An agency theory of organizations: Paper

presented at the 1994 Annual Meeting of the Academy of Management, Loews Anatole
Hotel, Dallas, TX, August 14-17. Available at
SSRN: [Link]

Mitnick, B. M. 1996/1998. The theory of testaments. Paper presented at a poster session of the
1998 Annual Meeting of the American Political Science Association, Boston, MA,
September 3-6. In Proceedings of the American Political Science Association, 1998. A
paper with the same name based on earlier research in this area was presented at a
showcase session at the 1996 Annual Meeting of the International Society for Business
and Society, Santa Fe, NM. In Proceedings of IABS, 1996.

Mitnick, B. M. 1999. Credible testaments, property, and the role of government. In N. Mercuro
and W. J. Samuels, eds., The fundamental interrelationships between government and
property, Vol. 4 in the series The economics of legal relationships, 165-176. Stamford,
CT: JAI Press.

Mitnick, B. M. 2000. Commitment, revelation, and the testaments of belief: The metrics of
measurement of corporate social performance," Business & Society (December): 39 (4):
419-465. This paper was presented at the 'Conversazione' on Business, Issues, and
Society in the 21st Century, University of Northern Iowa, Cedar Falls, Iowa, June 3-4,
2000.

Mitnick, B. M. 2009. Assurance and reassurance: The role of the board,” in R. W. Kolb & D.
Schwartz, eds., Corporate boards: Managers of risk, sources of risk, 294-315. Wiley-
Blackwell.

Mitnick, B. M. 2019. The theory of agency redux. Academy of Management Discoveries,

published online in advance of assignment to an issue.
 20
Mitnick, B. M., & Backoff, R. W. 1984. The incentive relation in implementation. In G. C. Edwards, III
(Ed.), Public policy implementation, Vol. 3: 59-122. Greenwich, CT: JAI Press.

Mitnick, B. M., & Ryan, R. C. 2012. The social construction of proof. Paper presented at the
2012 Annual Meeting of the Society for Business Ethics, Boston, MA (August).

Mitnick, B. M., Verma, K., & Marcus, A. A. 1999. Making incentive systems work: Incentive
regulation in the nuclear power industry," Journal of Public Administration Research and
Theory, 9(3): 395-436.

Mitnick, B. M., & Weiss, C., Jr. 1974. The siting impasse and a rational choice model of regulatory
behavior: An agency for power plant siting. Journal of Environmental Economics and
Management, 1: 150-171.

Moe, T. M. 1984. The new economics of organization. American Journal of Political Science
(November), 28: 739-777.

Noll, R. G. 1971. Reforming regulation: An evaluation of the Ash Council proposals. Washington,
DC: The Brookings Institution.

Perrow, C. 1986. Complex organizations: A critical essay (3rd ed.). New York: Random House.

Pitkin, H. F. 1967. The concept of representation. Berkeley, CA: University of California Press.

Pratt, J. W., & Zeckhauser, R., eds. 1985. Principals and agents: The structure of business.
Boston, MA: Harvard Business School Press.

Ross, S. A. 1973. The economic theory of agency: The principal's problem. American Economic
Review 62(2): 134-139.

Ross, S. A. 1974. On the economic theory of agency and the principle of similarity. In M. Balch,
D. McFadden & S. Wu, eds., Essays on economic behavior under uncertainty. North-
Holland, ch. 8.

Sappington, D. E. M. 1991. Incentives in principal-agent relationships. Journal of Economic

Perspectives, 5(2): 45-66.

Shapiro, S. P. 1987. The social control of impersonal trust. American Journal of Sociology
93(3): 623-658.

Shapiro, S. P. 2005. Agency theory. Annual Review of Sociology 31: 4.1-4.22.

Shapiro, S. P. 2016. Standing in another’s shoes: How agents make life-and-death decisions for
their principals. Academy of Management Perspectives, 30(4): 404-427.
[Link]

Simon, H. A. 1945. Administrative behavior. New York, NY: Free Press.

Spence, A. M., & Zeckhauser, R. 1971. Insurance, information, and individual action. American
Economic Review (May), 61(2): 380-387.
 21

Spender, J.-C. 2011. Human capital and agency theory. In A. Burton-Jones & J.-C. Spender (Eds.), The
Oxford handbook of human capital. Oxford: Oxford University Press.

Spulber, D. F. 1989. Regulation and markets. Cambridge: MIT Press.

Spulber, D. F., & Besanko, D. 1992. Delegation, commitment, and the regulatory mandate.
Journal of Law, Economics, and Organization (March), 8(1): 126-154.

Stinchcombe, A. L. 1986 [1975]. Stratification and organization: Selected papers. Cambridge:

Cambridge University Press. Includes: Stinchcombe, A. L. 1975. Norms of exchange:
Status, authority, and fiduciary norms in organizations. Paper presented at the 1975
Annual Meeting of the Public Choice Society, Chicago, IL.

Stout, L. 2012. The shareholder value myth: How putting shareholders first harms investors,
corporations, and the public. San Francisco: Berrett-Koehler Publishers.

Swanson, G. E. 1971. An organizational analysis of collectivities. American Sociological

Review (August), 36(4): 607-624.

Tussman, J. 1960. Obligation and the body politic. New York: Oxford University Press.

Waterman, R. W., & Meier, K. J. 1998. Principal-agent models: An expansion? Journal of

Public Administration Research and Theory (April), 8(2): 173-202.

Williamson, O. E. 1964. The economics of discretionary behavior: Managerial objectives in a

theory of the firm. Englewood Cliffs, NJ: Prentice-Hall.

Williamson, O. E. 1975. Markets and hierarchies: Analysis and antitrust implications. New
York: Free Press.

Williamson, Oliver E. 1985. The economic institutions of capitalism. New York: Free Press.

Williamson, Oliver E., Michael [Link], and Jeffrey E. Harris. 1975. Understanding the employment
relation: The analysis of idiosyncratic exchange. Bell Journal of Economics, 6: 250-280.

Wiseman, R. M., Cuevas-Rodriguez, G., & Gomez-Mejia, L. R. 2012. Towards a social theory
of agency. Journal of Management Studies, 49(1): 202-222.
[Link]

Wiseman, R. M., & Gomez-Mejia, L. R. 1998. A behavioral agency model of managerial risk-
taking. Academy of Management Review, 23(1): 133-153.
[Link]