This has been introduced by Jensen and
Mekling (1976) by Alchian and Demseta (1972)
and brought in use to emphasize that the
companies’ activities were supervised according
to the agreement to willingly make exchange
more convenient. It explained the best method of
systemizing relationship that one side (principals)
assigns work and the other side (agent) performs
it. And a problem of agent happens when a
shareholder (principals) employs a manager
(agent). So, relationship between an operator or
agent causes a problem; and an executive may not
create highest interest for shareholders or operator.
And, moreover, the agent takes informativeness of
the operator to be used for his own sake; and it
will cause transaction costs of operation called
agency costs.