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Abstract

Modern agency law—the consensual agreement of one person to work for and under the control of another—has been widely used to provide a general framework for understanding a great deal of business law. Agency law concepts can be used to frame pedagogical, scholarly, institutional, and even political discourses. In so doing, modern agency law addresses concerns about the institution of the corporation, generally by reference to contract: institutions are created out of essentially consensual, and hence justifiable, relationships among autonomous individuals. So modern agency law is more than a “theory” of the firm in the narrow sense of theory; modern agency law provides a liberal myth or ideology for business associations. As discussed below, the effort to establish the firm on the bedrock of modern agency law is serviceable for many social purposes, notably classroom teaching, but falls short in at least two ways. First, key corporate relations can be translated into agency law only by squinting in dim light. Second, agency law cannot really be understood solely in terms of consent. The problems with status and hierarchy found in the corporation are replicated in agency law, which used to be discussed more candidly in terms of master and servant. So while modern agency law provides a handy language for articulating much of corporate life, it does not allay the anxieties with which we seek a theory of the firm. Our theory is shallow. A less than gentle reader might ask: But so what? Why should modern agency law, of all things, be taken so seriously? Much of what follows in the remainder of this Essay is familiar, at least to law professors. Doctrinal structures are subjected to logical pressure that they cannot bear; contradictions emerge, and the author declares victory. But this is only a “victory” for thought under the strange assumption that agency law—or corporation law—is or should be highly intellectually consistent. While perhaps convenient for job talks, the idea that law is consistent has not been serious since Aeschylus. The structure of law is tragic; the law’s commitments are conflicted. Why, then, dwell on these relatively trivial difficulties with modern agency law’s apology for the firm? Why engage in extenuated doctrinal logic and close reading of old cases to debunk modern agency law? The vocabulary and grammar of agency law works well enough for teaching, policy discourse, and a rough and ready understanding of corporate law. Why be impolite?

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