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The Owner-Manager Relationship as a Principal-Agent Problem
A principal-agent problem, often referred to as the 'other people's money' problem, exists between the owners of a firm (the principals) and its manager (the agent). The conflict arises because the manager makes decisions using the owners' funds, but cannot be contractually obligated to act in a way that maximizes the owners' wealth. This allows the manager to potentially prioritize their own personal objectives over the financial interests of the owners.
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Introduction to Microeconomics Course
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CORE Econ
Ch.9 Lenders and borrowers and differences in wealth - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
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