principal-agent relationship


The arrangement that exists when one person or entity (called the agent) acts on behalf of another (called the principal). For example, shareholders of a company (principals) elect management (agents) to act on their behalf, and investors (principals) choose fund managers (agents) to manage their assets. This arrangement works well when the agent is an expert at making the necessary decisions, but doesn't work well when the interests of the principal and agent differ substantially. In general, a contract is used to specify the terms of a principal-agent relationship.

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The principal-agent relationship they had was going great and I could tell each of them knew what the other one wanted.

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I need to have a principal-agent relationship between me and my attorney, so that they can speak on my behalf at all times.

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You should try to have the best principal-agent relationship you can so both sides can help each other out when they need it.

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