Principal-Agent Problem
/ˈprɪnsəpəl ˈeɪdʒənt ˈprɒbləm/
Definitions
- (n.) A conflict in agency relationships where an agent's interests diverge from those of the principal, leading to issues of moral hazard and information asymmetry.
The principal-agent problem arises in corporate governance when managers prioritize personal gains over shareholders' interests.
Forms
- principal-agent problem
- principal-agent problems
Related terms
See also
Commentary
This concept is central to understanding conflicts in contractual and fiduciary relationships, highlighting the importance of incentive alignment and monitoring mechanisms.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.