The Principal-Agent Problem: Causes, Effects, and Solutions in Business Relationships Explained with Examples and Corporate Governance

In this question we will discuss about principal agent problem and below are the summaries point:- The principal-agent problem arises when specialists prioritize their own interests over the best interests of the principal, leading to conflicts and wasteful outcomes. Full transparency in information sharing between experts and principals can help prevent organizational issues and mitigate the risk of abuse of information gaps. Imposing restrictions on the capabilities of agents can minimize the chances of poor decision-making and ensure proper checks and balances in the organization.