Disrupting the agency model of corporate governance

Digital disruption poses many challenges for companies that rely on traditional business models and is forcing them to innovate to survive. Corporate governance regulators too are also having to innovate, one example being the recent changes to the rules to allow dual-class shares for the local market.

However, the overall approach to regulation still relies heavily on a decades-old agent-principal model where company managers are assumed to be agents of shareholders. This then begs the question - if some areas of traditional governance are being disrupted to meet the needs of the new economy and if companies themselves are changing their ownership structures, is there a need to rethink the agent-principal relationship?

For more than 40 years, corporate behaviour has been viewed through the lens of the "agency theory''. The main premise - shareholders own the corporation and are "principals" with original authority to manage the firm's business and affairs.