Agency Problem


Definition: the Agency Problem is an economic, political, legal and corporate governance concept that aims to explain the difficulties in motivating one party (the agent) to act in the best interests of another party (the principal) instead of in his own interest.
The main causes of the principle-agent problem include: differing interests, conflicting interests, asymmetric information and moral hazard.
Various mechanisms exist to counter the AP, none being very effective.


More on corporate governance: Belief System, Board of Directors, Boundary System, CEO Duality, Chairman of the Board, more...


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