2007-06-22 19:46:27 · 4 answers · asked by Anonymous in Business & Finance ➔ Corporations
Principal-Agent Relationship
Who can be a Principal?
Any person who has the legal capacity (meaning that they are not insane, or in certain circumstances a minor) to perform an act may be a principal and empower an agent to carry out that act. Persons, corporations, partnerships, not-for-profit organizations, and government agencies may all be principals and appoint agents.
Who can be an Agent?
Any individual capable of comprehending the act to be undertaken is qualified to serve as an agent.
What is the purpose of this relationship (called “Agency”)?
A contract to be made by an agent on behalf of a principal is considered to be the contract of the principal and not that of the agent. It allows the principal to authorize somebody to carry out her duties, either for a specific purpose (i.e., purchasing a house) or generally (i.e., to conduct many transactions). The agency relationship is usually entered into by informal agreement, but also can occur by formal agreement (in certain cases, the agency relationship must be specified in writing). The acts must be legal (i.e., principal can not hire agent to kill the professor).
What is the basis of the Agency relationship?
Inherent in the Principal-Agent (P-A) relationship is the understanding that the agent will act for and on behalf of the principal. The agent assumes an obligation of loyalty to the principal that she will follow the principal’s instructions and will neither intentionally nor negligently act improperly in the performance of the act. An agent cannot take personal advantage of the business opportunities the agency position uncovers. A principal, in turn, reposes trust and confidence in the agent. These obligations bring forth a fiduciary relationship of trust and confidence between P and A.
What are the obligations of the Agent to the Principal?
An agent must obey reasonable instructions given by the P. The A must not do acts that have not been expressly or impliedly authorized by the P. The A must use reasonable care and skill in performing the duties. Most importantly, the A must be loyal to the P. The A must refrain from putting herself in a position that would ordinarily encourage a conflict between the agent’s own interests and those of the principal (note: one might reflect on the role of certain Enron executives on “outside” limited partnerships that did business with Enron in the early 2000s). The A must keep the P informed as to all facts that materially affect the agency relationship.
2007-06-23 01:44:43 · answer #1 · answered by Sandy 7 · 0⤊ 0⤋
Principles Agency
2016-11-12 10:27:24 · answer #2 · answered by Anonymous · 0⤊ 0⤋
The answer to that could be derived from a persons conscience so I don't think everyone would agree with one only over the other. I can bear the weight of the responsibility for the actions I take good or bad, but to not act at all when I could have would bother my conscience. Maybe this is a bad example, but trust can show both action when it is readily given or restraint when it is held back. With trust, I've always acted and given it freely, the restraint only comes after I find that it was given in error. Whether a religion endorses action or restraint can depend upon the belief itself. For instance, many of my maternal ancestors were Quakers and that is a religion that is more about restraint - it is passive - it encourages pacifism which I will readily admit to getting mine from. However, on the flip side of that, even within that constraint they take what action they can as a good number of people who had 'stations' on the Underground Railroad during the US Civil War were Quakers who readily put themselves in danger to help others. I guess that is also a good example of your second point too.
2016-03-19 04:24:50 · answer #3 · answered by Lorri 2 · 0⤊ 0⤋
The agent or company must disclose what those responsibilities are, and more importantly, are not.
2007-06-22 20:17:27 · answer #4 · answered by Anonymous · 0⤊ 0⤋