You win the Mega Balls Lottery, worth $500 million. With your fortune, you buy a professional lacrosse team, the St. Croix Stickmen. You always wanted to be a big shot sports team owner, but sadly, $500 million wasn't enough for a team in one of the major sports. Except maybe hockey, but who'd want that?
You know nothing about lacrosse. So you hire a former lacrosse great Finneas Dartspank as your CEO and general manager. You put him in charge of every aspect of team operations. You just want to come to the game and play the big shot for the fans.
The relationship between you and Finneas defines the principal-agent relationship. You own the team, but he makes the decisions. He's acting on your behalf. He's your agent and you're the principal (as in: the owner of the team). He has all the knowledge of the industry and is likely to make more informed decisions than you would. However, the relationship can get sticky if his interests diverge from yours.
See: Principal-Agent Problem.
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Finance: What is Acting As A Principal?36 Views
Finance what is acting as a principal Yeah unless you
want to get sent to detention we don't recommend doing
this on halloween Okay this one's really about acting as
a principal How versus acting as an agent princip al
equals owner agent equals a commission taker principal The end
result like how well or poorly and investment performs determines
success Agent whether or not a commission happens determines success
Principal The party responsible for a given system or project
or event being successful agent the party responsible for getting
people teo just spend money on that event Principal developer
The person risking capital to make say a commercial building
Make money for investors Agent the person who sold office
units in that commercial building Principal the portfolio manager the
buy side player region the stockbroker the sell side player
and well that's it in our next video will cover
acting as a shakespearean prince also challenging but the pay 00:01:23.426 --> [endTime] isn't is good
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