Principal: The person or entity on whose behalf and subject to whose control an agent acts.
Agent: A person who agrees to act on behalf of and instead of his or her principal, subject to the principal's control.
<h3>What is the meaning of the principal-agent problem?</h3>
The principal-agent problem is a conflict in priorities between a person or group and the representative authorized to act on their behalf. An agent may act in a way that is contrary to the best interests of the principal.
<h3>What is a principal-agent relationship?</h3>
The principal-agent relationship is an arrangement in which one entity legally appoints another to act on its behalf. 1 In a principal-agent relationship, the agent acts on behalf of the principal and should not have a conflict of interest in carrying out the act.
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