Explain what is meant by principal and agent Give examples o

Explain what is meant by principal and agent. Give examples of some of the conflicts between the agents and principals. Also explain two ways used to minimize this conflict?

Solution

A Principal can be defined as any person who would hire a person (known as the agent) to carry on any work on his behalf.

An Agent can be defined as a person who pursues the interest of the principal.

There Principal-Agent relationship can defined as an arrangement in which the Principal would legally appoint an agent to conduct work on his behalf.

Examples of conflicts of interest between agents and principals

Two ways to minimise the conflicts between agents and principals are: