Head office and branch or subsidiary, Finance Basics

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Head Office and Branch or Subsidiary

MNC has diverse operations set up in dissimilar geographical locations. The HQ acts like the principal and the subsidiary like an agent hence creating an agency relationship. The subsidiary management may pursue its own goals of on the whole corporate goals at the expense. This will lead to conflict and sub-optimization of interest along with headquarters.

This conflict can be resolved in the following methods as:

a) Managers' Frequent transfer

b) Adopt global strategic planning to surly commonality of vision

c) Having a voluntary code of ethical practices to direct the branch managers

An elaborate performance reporting system given 2-way (two way) feedback mechanism. Performance contracts along with managers via commensurate compensation package for the same.


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