Problems With The Agency Relationship

If you are the sole owner of a business, you make the decisions that affect your own well-being. But what if you are a financial manager of a business and you are not the sole owner? In this case, you are making decisions for owners other than yourself; you, the financial manager, are an agent. An agent is a person who acts for—and exerts powers of—another person or group of persons. The person the agent represents is referred to as the principal.