The separation of ownership and control in a modern corporation often requires
the delegation of significant decision-making authority to professional
managers, which introduces the possibility that managers will have incentives to
make decisions that benefit them at the expense of stockholders. We discuss the
theory and empirical evidence on stockholder–manager conflicts, provide an
overview of the problems that can arise in U.S. corporations, summarize recent
empirical evidence on the effectiveness of the various mechanisms that can
control these problems, and alert investors to global variations in problems and
controls.