This chapter critically reviews the state of knowledge about separation of ownership and control, regarded as the core problem of corporate governance. It discusses the mainstream principal–agent approach to corporate governance in a world of incomplete contracts. It shows that two major predictions of this model – separation of management from risk bearing and contestability of corporate control – are not always borne out by the empirical evidence. Furthermore, this chapter reviews the main achievements and shortcomings of the law and finance scholarship in dealing with this puzzle. Finally, it is argued that stakeholders do not need special legal protection in corporate governance.