In the corporate world of business, the principal-agent problem arises between:

Question

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The principal-agent problem arises between managers and stockholders in the corporate world. Managers (agents) are responsible for managing the company and making decisions on behalf of the stockholders (principals). However, managers may act in their own self-interest rather than in the best interest of the stockholders, which creates a conflict of interest known as the principal-agent problem. Stockholders must ensure that managers are acting in their best interest by monitoring and providing incentives to align the interests of both parties.

In the Corporate World of Business, the Principal-Agent Problem Arises