Corporations have a separation and control problem because

Question

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Owners typically seek profit maximization, while managers may have personal goals and incentives that differ from those of shareholders. This creates a separation problem where managers may prioritize their own goals over the interests of shareholders. Additionally, effective control of a corporation by shareholders can be challenging as their voting rights may be diluted by the large number of other shareholders, making it difficult to coordinate and enforce decisions. The reinvestment of profits and tax payments by boards of directors do not directly relate to the separation and control problem.

Corporations Have a Separation and Control Problem Because