Case study-fin | Business & Finance homework help
An agency relationship is a legal arrangement in which one party acts as an “agent” for another, or the “principal”. This means that the agent has been authorized to act and make decisions on behalf of their principal – such as purchasing materials or signing contracts. The principal usually enters into this type of agreement because they do not have the time or resources to perform these tasks themselves.
When beginning operations with only one employee and only their own money invested in the business, no agency conflicts would exist at first since there are no other stakeholders involved. However, as the business grows and other employees/investors become involved, potential conflicts may arise due to competing interests and objectives between different individuals within the organization. For example, if two employees disagree on how a particular project should be managed it could lead to a disagreement between them which might require intervention from their superior (or principal) so that all parties can reach a consensus before any further action is taken. It is important for businesses to remain mindful of these types of situations so that any issues can be resolved quickly and efficiently without disrupting operations or damaging relationships between stakeholders.