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3.2 Principal Agent and Other Relationships in Corporate Governance
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A principal agent relationship (also known as an agency relationship) is created when a principal hires an agent to perform a particular task or service.

The principal agent relationship involves obligations, trust, and expectations of loyalty; the agent is expected to act in the best interests of the principal. In a company, principal agent relationships often lead to conflicts for example, when managers (as agents) do not act in the best interests of shareholders (as principals).
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