The principal-agent relationship (PAR) arises when one group delegates decision making or control to another group. The PAR can create problems because the group receiving the power (the agent) generally has an asymmetric information advantage over the group making the delegation (the principal). The PAR problem begins if the agent uses the information advantage for their own best interests to the detriment of the interests of the principal. It is compounded as the asymmetric information makes it difficult for the principal to know enough to detect the problem and evaluate the agent’s actions. Modern corporations are built on shareholders (principals) who delegate authority to run the business to executive officers of the company (agents). The board of directors are charged with overseeing the executives of the firm. It is possible for the board of directors to align themselves too closely with the executives of the firm thus contributing to the PAR problem. | 
