Question

As a top executive, the only agency relationship I am concerned about is the one between myself and the owners of the firm. I think that it would be a waste of my time and energy to worry about any other agency relationships.

What are these other agency relationships? How would you respond to this person? Do you accept or reject this view? Support your position.

Answer 1

There are two major agency relationships in any organization: one between the employee and his employer and the second between the company (executive) and the organization’s third party channels (agents that are used for product/service distribution).

I do not accept (or reject) the above mentioned view on top executive’s agency relationships, as I believe that being a top executive in the firm, makes it much more crucial for the person to also engage in or get concerned about his/her agency relationship with third party vendors/distributors/agents, as this agency relationship also has a big impact on the company’s success in the market. Being said that, the executive’s focus is also dependent on the role he/she is being assigned, and thus if his/her role allows the person to effectively do his job with focus on only one agency relationship, i.e. between him/her and the firm’s owners, then the above view can be accepted.