Principal-Agent Problem

This refers to the scope for conflicts of interest between those who own a business and those who run it.

The concept reflects the fact that Principals’ (or shareholders/stakeholders) interests for return on their investment may conflict with Agents’ (directors/managers) interests in financial reward and job security. Ideally both parties interests are mutual with increasing shareholder value resulting in good financial rewards and job security for staff.

Principal Agent Problem

Principal-Agent Problem is a term normally found in economics and financial management

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