Agency help

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HabeasTortoise
Posts: 15
Joined: Wed Dec 11, 2013 2:51 pm

Agency help

Postby HabeasTortoise » Fri Dec 05, 2014 10:05 pm

Hey guys. I have my bus org final next week and had a quick question. For some unbeknownst reason, we learned agency on the last day of class.. As such, I am a little confused as to how agency applies to broader corporation principles. Directors for example have a duty of care, loyalty, etc, but aren't they also agents? How does this change the analysis. Would I need to go through the analysis of why they are agents, or can this be skipped and the duties presumed for controlling shareholders, officers, directors, etc. Thanks.

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ymmv
Posts: 13045
Joined: Mon Oct 21, 2013 1:36 pm

Re: Agency help

Postby ymmv » Fri Dec 05, 2014 10:20 pm

HabeasTortoise wrote:Hey guys. I have my bus org final next week and had a quick question. For some unbeknownst reason, we learned agency on the last day of class.. As such, I am a little confused as to how agency applies to broader corporation principles. Directors for example have a duty of care, loyalty, etc, but aren't they also agents? How does this change the analysis. Would I need to go through the analysis of why they are agents, or can this be skipped and the duties presumed for controlling shareholders, officers, directors, etc. Thanks.


Yes, directors are agents, and no, I don't think it plays into much if the analysis. At least in our class, the past exams clearly delineate questions about agency principals generally from questions about duties of directors and officers. Maybe take a look at yours, if available?

GunnerBingo
Posts: 24
Joined: Sun Feb 02, 2014 2:07 pm

Re: Agency help

Postby GunnerBingo » Sat Dec 06, 2014 12:44 am

It really depends how it was presented in class. As HabeasTortoise said, usually agency issues will be addressed in a separate topic/exam question than corporate duty of loyalty etc.

I learned the basic corporate agency structure as follows: Shareholders are the principle. Shareholders delegate power/authority to the board to act on behalf of the company. In this way the board of directors are agents of the shareholders, but they are also a sort of quasi-principal because while the board is generally under a duty to act in the interest of the shareholders, the board is generally under no obligation to follow orders of simple majority shareholders, so in that regard they aren't purely agents (this is to protect minority shareholders). The board then delegates authority to the officers (CEO, etc.) who are by definition agents.

All this said, as OP mentioned, all these agency relationships should be assumed in your analysis unless you explicitly get asked to discuss the agency issues presented.




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