Agency theory posits that corporate boards should be independent from management, because management acts as an agent of the company's owners or shareholders. Of course, a self-serving management team could, if left unchecked, pursue things at odds with the shareholders' best interests. To preclude this possibility, agency theory also specifies that independent boards of directors, not closely associated with management, be established to monitor management's performance—and use levers like compensation to guide behaviors.
Moreover, agency theory addresses the role of information. It recognizes that managers know more about their business than shareholders (and directors) do, and that this information asymmetry allows management, if it's inclined, to pursue goals divergent from shareholders' interests. Therefore directors need to overcome this asymmetry so that they can protect their companies' shareholders and have a firm grasp of their businesses and the risks they face.
Of course, how two entities interact is always affected by how much they know of each other's interests, objectives, fears and aspirations. While each side has knowledge of itself and knowledge about the other side, both also have blind spots: things they don't know about themselves and things they don't know about the other side.
We can categorize these interactions into four basic groups. First, open discussion or review is when each side reveals what it knows to one another. Second is when the board fulfills its role as adviser, and members share insights and experiences with management. Third is disputed territory, when disputes between management and the board emerge because the board's quest for further discussion or review challenges the line between management's knowledge (of operations, for example) and the board's. And fourth is the danger zone: Neither management nor the board has knowledge about a situation—for instance, neither knows about a competitor's behavior.