What is an example of an agency problem?

For example, if an agent is paid not on an hourly basis but by the completion of a project, there is less incentive to not act in the principal’s best interest. An agency problem is a conflict of interest where one party, motivated by self-interest, is expected to act in another's best interests.

What causes agency problems?

Agency problems result from the agent not acting in the principal's best interest with a common cause being financial incentives. Efforts such as transparency and corporate governance can help mitigate agency problems. What is an agency problem?

How do you deal with agency problems?

A simple approach to mitigating agency problems is to limit the likelihood of financial incentives that encourage conflicts of interest. When the agent's financial gain relates to the product or service they offer, there's an increased likelihood that they may not act in your best interest to make more money.