Agentic AI and Agency Theory: The Corporate Governance of an Intelligent Future

One of the questions I frequently ask in my Corporate Governance classes is: "What is the difference between a corporate director, a condominium administrator, and a database admin?" The most common answer, of course, is "the salary." However, this exercise helps clarify an essential point: the main difference is not in the objective (value creation) or the responsibilities (evaluate, direct, and monitor) but in the scope of responsibility.

This understanding becomes even more relevant in a world where Agentic AI promises that we can all become administrators of our own lives, delegating daily management and operations to AI.

Administrators of Our Own Destiny: The Governance of AI Agents

AI Agents typically operate within a well-defined set of rules. Even when they incorporate machine learning, they remain reactive, returning to a point of human oversight when limits are reached or anomalies arise. Agentic AI, on the other hand, represents a leap that challenges both innovation and governance. These systems can learn, plan, and make decisions on their own, pointing toward a future where each of us might become a shareholder in a personal AI ecosystem entrusted with decisions that directly affect our health, productivity, and broader aspirations.

It is here that Agency Theory takes on a new, disquieting relevance. Agency Theory serves as a model that structures the relationship between principals (shareholders) and agents (managers), ensuring that the latter act in the best interests of the former. By introducing highly autonomous AI systems into this equation, we see an unprecedented dynamic emerge: in the near future, any citizen could become a shareholder in their own ecosystem of AI agents, delegating critical decisions related to their well-being, productivity, and fulfillment of needs.

If corporate boards are already grappling with the challenge of overseeing AI in their organizations, it is intriguing to note that individuals will need to develop similar literacy to manage their "digital executives." Do we know how to evaluate the performance of AI agents making decisions on our behalf? Do we understand how to ensure alignment between our interests and the algorithms governing these entities?

The distinction between Governing, Managing, and Operating is one of the fundamental concepts of Corporate Governance. Governing means defining direction and strategic oversight, managing involves translating this vision into tactical and operational action, and operating is executing the necessary tasks to achieve objectives. In the world of Agentic AI, this structure remains vital.

• The role of the shareholder/citizen: As owners of our AI systems, we need an effective governance model to assess their effectiveness and mitigate risks of misalignment.
• The role of the manager/executive: Like human managers, agentic AI will need to be supervised using appropriate metrics and clear guidelines to ensure it meets the objectives we delegate.
• The role of the operator: Although AI operates autonomously, its interaction with systems and human decisions will require safeguards and constant monitoring to prevent erroneous or harmful decisions.

I recognize that Agency Theory remains one of the most influential frameworks in the formation and implementation of Corporate Governance practices. However, I believe that a model focused solely on power delegation is insufficient in today’s context. I prefer approaches based on Stakeholder Theory, which demand more than just a simple principal-agent relationship; they require a real commitment to value creation, balancing multiple interests and considering social, environmental, and economic impacts.

With the mass adoption of Agentic AI, this perspective becomes even more relevant. Leaving the management of our interests exclusively in the hands of algorithms could lead to systemic failures similar to those observed in corporate governance when there is a lack of alignment between management and stakeholders. Now more than ever, we need mechanisms to Evaluate, Direct, and Monitor the performance and incentives of these new autonomous entities.

The Accountability of the Future

The rise of Agentic AI is not just a technological challenge but also a governance challenge. Just as administrators must structure oversight mechanisms to ensure their companies act in the best interest of their stakeholders, individuals must learn to manage the "digital executives" that will become part of their lives.

If, in the past, the central concern of corporate governance was ensuring that human managers did not abuse their power at the expense of shareholders, we now need to ensure that agentic systems follow ethical principles and align with the values of those who "hire" them. The new reality will be one where anyone can be both a shareholder and an administrator of their own future, and for that, mastering the fundamentals of effective governance is essential.

Let us be more than mere users of AI. Let us become true administrators of our destiny.

Bruno Horta Soares

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