AGENCY THEORY

a doctrine which defines financial and organizational processes in regards to a selection of arrangements between principals, who ask for products or professional services, and agents, who give said products or professional services. In the center of this idea is the logical financial presumption that both the agents and principals will likely try to optimize their individual resources. Difficulties might surface whenever the concerns of principals and agents aren't congruous, or whenever principals have limited data concerning the operations of said agents. Department standards recommend methods in which these kind of issues can be decreased, particularly by restructuring legal agreements or payment designs in such a way that agents retain an advantage to behave in the ideal interests of principals and by enhancing observation policies.