A managerial revolution in reverse: finance market control of the corporation and the triumph of the agency theory model

Journal article, 2015

Corporate governance denotes different practices and procedures in economic sociology and in the economic theory literature; while economic sociologists are concerned about understanding the institutional features of corporate law and other corporate governance vehicles, economists are primarily interested in theorizing how capital owners can reduce agency costs. In pursuing the latter objective, agency theory has been remarkably successful in advancing shareholder value creation as the only legitimate objective of firms. This accomplishment is deeply entangled with a series of political, macroeconomic and institutional changes in (primarily) the US economy and political life, including the financialization of the world economy. The article examines these changes and stresses the capital funding of free-market advocates in academic communities as a decisive factor that contributes to the popularity of shareholder value creation. The study thus calls for a broader institutional view of the political economy of corporate governance and in the study of the ‘managerial revolution in reverse’ taking place as managerial capitalism is displaced by investor capitalism. © 2015, Taylor & Francis.