THE PRINCIPAL-AGENT PROBLEM IN PRIVATE LIMITED COMPANIES IN UK AND GERMANY

Abstract

The principal-agent problem is a central issue in the field of corporate governance, encapsulating the challenges that arise when one party (the agent) is expected to act in the best interest of another (the principal) but possesses incentives to prioritize their own interests instead. This complex dynamic is particularly prevalent within private limited companies, where the separation of ownership and control can lead to conflicts of interest and inefficiencies. This thesis delves into the manifestations, implications, and strategies for mitigating the principal-agent problem within private limited companies in the United Kingdom (UK) and Germany, offering insights into the interplay between different corporate governance models and the principal-agent problem.