Which one of the following statements is TRUE?
A) In an agency relationship, the principal delegates decision-making authority to the agent.
B) In an agency relationship, the agent delegates authority to the principal.
C) An example of an agency relationship is when the CEO nominates a slate of candidates to be on the board of directors.
D) An example of an agency relationship is when a supervisor hires a forklift operator.
E) The supervisor-employee relation between a production line supervisor and a production line operator is an example of an agency relationship.

Question

Quizplus · Accepted Answer

In an agency relationship, the principal delegates decision-making authority to the agent. This is the fundamental characteristic of an agency relationship. Option B is incorrect because the agent does not delegate authority to the principal. Option C is incorrect because the CEO and the board of directors have a completely different relationship - that of the board of directors serving as the principal and the CEO serving as the agent. Option D is incorrect because the supervisor-hire relationship is that of employer-employee, not principal-agent. Option E is incorrect because the supervisor-employee relationship is not an agency relationship - there is no delegation of decision-making authority.

Which One of the Following Statements Is TRUE