Agency theory is one of the most important foundational theories in management research, but it rests on contestable cognitive assumptions. Specifically, the principal (e.g., manager) is assumed to hold a perfect (correct) theory regarding some of the content of the agent’s (e.g., employee) mind, while he is entirely ignorant concerning other such content. More realistically, individuals have some limited access to the minds of others. We explore the implications for classical agency theory of realistic assumptions regarding the human potential for interpersonal sensemaking. Specifically, we present formal and theoretical reseach that explores the value creation potential of having a theory of the other’s mind in principal-agent relations. Further, we discuss a future research agenda aimed at empirically testing these ideas.