1b. What is an agency problem, and which incentives are offered to avoid agency problems? The agency problem happens when conflicts of interest keep one party from acting in the best interest of another party. Types of agency problems can be considered as managers vs, owners, Creditors vs. owners, senior management vs. junior management. By taking specific steps and staying organized, a company can minimize the chance of this happening in business. Shareholders can use bonuses to resolve conflicts with the board of directors or other managers, improve supervision, and improve regulation