Agency conflicts between managers and shareholders

Remember, an agency relationship can degenerate into an agency conflict when an agent acts in a manner that is not in the best interest of his or her principal. In large corporations, these conflicts most frequently involve the enrichment of the firm's executives or managers $($in the form of money and perquisites or power and prestige$)$ at the expense of the company's shareholders. This usurping and reallocation of shareholder wealth is most likely to occur when shareholders do not have sufficient information about the decisions and actions being made by the firm's management.

Consider the following scenario and determine whether an agency conflict exists:

Alexander owns Alexander's Tantalizing Tees, a T$-$shirt shop in a small college town in Georgia. With a staff of three part$-$time employees, Alexander operates the business in accordance with his personal goals, dreams, and capabilities.

Does Alexander have an agency conflict to deal with?

Yes; as both the owner and operator of Alexander's Tantalizing Tees, Alexander has created the necessary agency relationship through which an agency conflict can exist.

No; as both the owner and operator of Alexander's Tantalizing Tees, Alexander has not created the necessary agency relationship through which an agency conflict can exist.

No; by having part$-$time, as opposed to full$-$time, employees, Alexander is prevented from experiencing an agency conflict.

Yes; there is always an inherent conflict of interest between owners and operators $($managers$).$