the.com/principal agent
you hire someone to act for you, then spend forever making sure they actually do.
means a relationship where one party (the principal) delegates decisions to another (the agent), who may not share the principal's incentives.
from formalized in 1970s economics by michael jensen and william meckling, though the puzzle is as old as any king wondering if his tax collector was skimming.
core problemagent has information the principal lacks
academic nameagency theory, born 1976 paper
fix attemptstock options tie ceo pay to shareholders
cost has nameagency cost, the price of trust
for instance
ceo and shareholders — executives may prioritize empire-building over dividends
real estate agent — gets commission whether you overpay or not
elected politicians — voters delegate power, hope for accountability every few years
fund managers — paid fees regardless of your portfolio's performance