This article argues that the notion of authority involves key theoretical and institutional issues. Drawing on McMahon, I define authority as a collective and normative device whose justification is to facilitate mutually beneficial cooperation among people with divergent aims. I then show that agency theory, the economic theory of the firm that normatively influenced the shareholder governance model, denies that authority is a core attribute of firms. By contrast, an authority-based theory of the firm normatively demands that firms are governed by reflexive authority, a kind of workplace democracy in which the authoritative directives guiding workers’ behavior are collectively determined. I end by suggesting co-determination as a possible form of reflexive authority.

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Authority,Theory of the firm,Workplace democracy,Corporate governance

• Economics and Business - Social Sciences