Breaking down companies

A basic, useful assumption in neo-classical economics is simply that companies are responsible only to their shareholders, and have the single goal of maximising profits. That serves you very well for a few years; after a while, you discover that in fact managers are capable of surreptitiously seizing control of companies that they do not own. And so you have to learn principal-agent theory — the owners are the principal, and the manager their agent — to try and work out how to get companies working properly at profit maximisation again, perhaps through tweaking how managers are co.....

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