agency problem


A conflict that exists in an organization between those who are in positions of control or trust (agents) and those whose interests are to be served (principals or stakeholders) in which actions taken by the agents instead serve their own interests. Such conflicts tend to arise more frequently in organizations that lack sufficient or effective material, moral and coercive incentives for agents to act otherwise. Also called principal-agent problem.

Use agency problem in a sentence

There was an agency problem and I knew that it had to be addressed soon, or things would not work out.

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There some rumblings of a potential agency problem, and many shareholders were starting to ask for a shake-up at the top of the management chain.

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When he looked at the expectation of the board of directors versus that of the stakeholders, he instantly knew that the interests were indeed directly opposed and not able to be served simultaneously and that created an agency problem.

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