What is an agency relationship? When you first begin operations, assuming you are the only employee and only your money is invested in the business, would any agency conflicts exist?

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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. This is often because the principal does not have time to complete these tasks.

Since there are only one or two stakeholders, the agency conflict is not present at first. As the company grows, and more employees/investors are involved, conflicts can arise as a result of competing objectives and interests between individuals in the organization. In the case of two employees who disagree about how to manage a certain project, it may lead them into a dispute that requires their principal (or superior) to intervene so they can come up with a solution. Businesses should be aware of such situations to ensure that they can resolve any problems quickly without damaging their relationships or disrupting their operations.