Agency Conflicts are when interests of agents
and principals do not align with each other. The agent is a person who has the
implied or actual authority to act on the behalf of the other. The owners whom
the agents represent are the principles. There are many consequences of agency
conflicts, a company’s reputation will diminish and the cost of capital will be
higher. All these consequences make it hard for a company to do business.
Textron and the Board have strict guidelines
when it comes to agency conflicts and ethics. The Board expects its Directors
and other employees to act ethically at all times and to adhere to the Textron
Business Conduct Guidelines (Governance, 4). In addition to complying with the
Business Conduct Guidelines and other applicable Company policies, Directors
are expected to avoid any action, position or interest that conflicts with an
interest of Textron or that gives the appearance of a conflict. If any actual
or potential conflict of interest arises for a Director, the Director must inform
the Chairman, the CEO and the chair of the Nominating and Corporate Governance
Committee (Governance, 4). If a significant conflict exists and cannot be
resolved, the Director should resign. Directors will recuse themselves from
discussions or decisions affecting their personal, business or professional
interests. Potential agency conflicts would be a senior manager approves a
certain project that goes against the opinions or interests of the Board of
Directors. Another example, similar to the Microstrategy case would be a
manager altering financials to make the company value look higher than it
should. Though audits and internal controls, agency conflicts can be avoided.
Textron makes sure that the Nominating and
Corporate Governance Committee as well as the audit committee are working to
make sure that any director within the company remains independent to any
company or affiliates that Textron conducts business with (Governance,
16). Textron has Director Independent
Standards that each director must adhere to or subject for review due to lack
of independence (Governance, 16). Textron also has a standard of independence
for their audit committee.
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