Principal-Agent Relationships
Agency theory handles numerous situations in which one party acts on the behalf of the other. Financial institutions are given the responsibility of generating shareholder wealth. However, its business practice forces it to incur risk by issuing loans – some of which are outside the comfort level of shareholders. Financial planners and portfolio managers are agents on behalf of their clients and the client’s investments. Finally, a lessee may be in charge of protecting and safeguarding assets that do not belong to themselves. Even though the lessee is tasked with the job of taking care of the assets, the lessee has less interest in protecting the goods than the actual owners.
Source:
https://www.investopedia.com/terms/a/agencytheory.asp#ixzz5DNtdDePG
