Agency theory suggests that problems arise in organizations because "the agents (top management) no longer bear the full results of their decisions unless they own a substantial amount of stock in the corporation."

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Agency theory suggests that the interests of managers and shareholders may not always be aligned because managers may prioritize their own interests over those of the shareholders. Therefore, agency theory proposes that managers who own a significant amount of stock in the corporation are more likely to make decisions that benefit the shareholders because their own financial interests are tied to the success of the company.

Agency Theory Suggests That Problems Arise in Organizations Because "The