Agency relationship between government and the shareholders, Finance Basics

Agency Relationship between Government and the Shareholders

Shareholders and via extension, the company they own operate within the environment requiring the charter or license granted through the government.  Such government will expect the company and via extension its shareholders to activate the business in a manner that is beneficial to the complete the society and economy.

In this agency relationship the government is the principal whereas the company is the agent.  So it becomes an agent when it has to gather tax on behalf of the government particularly withholding tax and PAYE.

The company carries on business also on behalf of the government since the government does not have sufficient capital resources.  It offers conductive investment environment for the company and share in the benefit of the company in form of taxes.

The company and its shareholders as agents may obtain some actions which might prejudice the position or interest of the government like the principal.  These actions comprises as:

  • Tax evasion: This comprises the failure to provide the exact picture of the profits or earnings of the firm to minimize tax liability.
  • Involvement in illegal business activities through the firm.
  • Lukewarm answer to social responsibility calls via the government.
  • Lack of sufficient interest in the safety of the staff and the products and services of the company involving lack of environmental awareness concerns via the firm.
  • Avoiding certain categories and areas of investment coveted via the government.
Posted Date: 1/29/2013 1:50:16 AM | Location : United States







Related Discussions:- Agency relationship between government and the shareholders, Assignment Help, Ask Question on Agency relationship between government and the shareholders, Get Answer, Expert's Help, Agency relationship between government and the shareholders Discussions

Write discussion on Agency relationship between government and the shareholders
Your posts are moderated
Related Questions
FUNCTIONS OF BUDGET THAT MUST BE PRESENT IN THE MUNICIPAL FINANCIAL MANAGEMENT AND INDICATE HOW THESE FUNCTIONS CAN INFLUENCE MUNICIPAL FINANCIAL MANAGEMENT

An industrial engineer proposed the purchase of a RFID Fixed Asset Tracking System for the company's warehouse and weave rooms.  The engineer though that the system would provide a

Debt Finance in US of Small Companies Why It CAN Be Difficult For Small Companies to Raise Debt Finance in US Lack of safety avoidances of finances available

International Data Systems information on revenue and costs is only relevant up to a sales volume of 100,000 units. After 100,000 units, the market becomes saturated and the price

Identify one each (1) benefit, (2) disbenefit, and (3) monetary cost that would impact each of the following projects: a.A new electrical distribution station in a developing pa

Computation of Payback Period Method 1. Under uniform annual incremental cash inflows - if the venture or an asset generates uniform cash inflows then the payback period (PB

Explain about the monetary role of banks. The Monetary Role of Banks: • A bank is a financial intermediary. • Bank reserves are the currency banks hold within their va

FASB Assignment


what are the modern methods of evaluating capital projects? how they different from old methods?