Divorce of ownership and control

From WikiTextbook

Many companies have a divorce of ownership and control, meaning the owners and those who control the firm (managers) are different groups with different objectives. The owners will more than likely wish to pursue a profit maximising objective; however the managers will more than likely have their own agenda. Managers may wish to have an easy life or maximise their prestige, the pursuit of these goals will lead to increasing costs and therefore profits will fall. This behaviour is described as profit satisficing; the managers make enough profit to keep the shareholders happy, while enjoying as many perks as possible.

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