Corporate governance addresses principal agent problem.
The principal-agent relationship is an arrangement in which one entity legally appoints another to act on its behalf
Corporate governance is the system by which companies are directed and controlled. They set a structure of rules, practices, etc. so that the company can be managed.
The correct functioning of the company depends on corporate governance only. They play a major role in maintaining principle-agent relationship, where basically a principal is appointed on behalf of an agent, and a no-conflict pact is formed between the two. This pact is called a principal agent relationship which is represented in a written form. A very well-known example of a principle-agent relationship can be when an investor picks a fund manager or someone hires an attorney for legal work.
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