Question

what is agency conflicts? When dealing with a company.

Answer 1

Agency conflict refers to the the conflict of interest between the principles and agents in an organization.

The shareholders who are the owners of the firm are the principals and the managers are the agent. Shareholders want the managers to manage the company in a way that increases the shareholders’ value. While, the managers may wish to run the company in a way that increases their wealth and prestige even if it results in a decline in the market value of the company. And there lies the conflict between managers and shareholders.