Certification in Supplier Diversity Practice Exam

Which of the following actions is NOT typically taken by a principal in an agency relationship?

1. Providing compensation

2. Limiting the agent’s authority

3. Reimbursing the agent for expenses

4. Dictating daily tasks

The correct answer is: Dictating daily tasks

In an agency relationship, the role of the principal is to establish a framework within which the agent operates. The actions that a principal typically takes include providing compensation for the agent's services, reimbursing the agent for expenses incurred while acting on behalf of the principal, and officially defining the scope of the agent's authority. However, dictating daily tasks is not a common action taken by a principal. In a healthy agency relationship, the principal grants the agent some degree of autonomy to perform tasks as they see fit within the scope of their authority. Agents are expected to exercise their judgment and expertise based on the principal's overall goals and objectives rather than follow minute daily instructions. By allowing agents to manage their tasks, principals benefit from the agents' specialized knowledge and skills while maintaining a flexible operational dynamic. This balance supports the effectiveness of the agent's role and fosters a trusting relationship between the principal and agent.