The principal-agent problem is the issue of inducing
A) agents and principals to work hard.
B) principals to act in the best interests of agents.
C) agents to act in the best interests of principals.
D) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The principal-agent problem arises when agents (e.g., employees or managers) have incentives that are not aligned with the principals (e.g., owners or shareholders), and the challenge is to ensure that agents act in the best interests of the principals.

The Principal-Agent Problem Is the Issue of Inducing