Question

Discus agent-principal conflicts. in you answer explain what they are, how and why they arise and what can be done to

reduce them.

Answer 1

Agent-Principal Conflicts is conflict of interest between agent and principal when an agent acts in his personal interest rather than working in interest of principal's interest. An agent is generally appointed to work on behalf of principal .Once he works in his personal interest ,The conflict arises.

They exists because A human being is always motivated to work in his interest than others and as he possess more informations than principal ,he is inclined towards self goals.

REMEDIES

1. Agreements must be clearly defined and scope of work should clearly specify measures to be undertaken under specific situations..

2.Performance Linked Compensations- Compensation of the agent must be linked with his own performance and he should be awarded for his outperformance.

3.A better communication channel between principal and agent can resolve a lot of conflicts.