Jean and Bean have been married for four years now. They are expecting a baby soon and have plans to have another when the first child reaches 4 years of age. They currently operate a small online business selling fresh fruits and vegetables. Although they have operated as an informal business from their home for the last three years, their business is presently doing quite well. After some deliberation, they have agreed to make their business formal.

Jean and Bean have approached you as a management consultant to assist and advise them in a few areas: business operational and financial issues; an appropriate form of business organisation based on the current business condition; and some personal finance issues

1. Discuss the principal-agent relationship with Jean & Bean. In your discussion, give an example of how a principal / agent problem arises in the corporate world, and can such a problem become costly? (12 marks)