directors, in practice they delegate many others to management, at least on a day-to-day basis. 58 In addition, some of the shareholders' rights shift to creditors during periods of financial distress. Developing a formal model of the firm that contains all these features, and that includes also an explanation of the firm's financial structure, is an important and challenging task for future research. Fortunately, recent work suggests that the task is not an impossible one. 59
This article began with the observation that the portrayal of the firm in neoclassical economics is a caricature of the modern firm. It then went on to discuss some other approaches that attempt to develop a more realistic picture. The end product to date is still, in many ways, a caricature, but perhaps not such an unreasonable one. One promising sign is that the different approaches economists have used to address this issue--neoclassical, principal-agent, transaction cost, nexus of contracts, property rights-- appear to be converging. It is to be hoped that in the next few years the best aspects of each of these approaches can be drawn on to develop a more comprehensive and realistic theory of the firm. Such a theory would capture the salient features both of modern corporations and of owner-managed firms, and would illuminate the issues for economists and lawyers alike.