Finance
The separation of ownership and management in corporations raises a very important issue, namely, whether managers act in the shareholders' interest. Although shareholders own a corporation, a board of directors is responsible for hiring managers to run it. Remember from your finance class the reasons managers generally act in shareholders' interests. First, a corporation's financial performance may directly affect managers' compensation; managers may have stock options to purchase company stock at a discounted price that are more attractive when the company's stock increases in value. A second reason is that managers who meet shareholders' goals will generally be better prospects for promotion to upper-management positions. Third, stockholders control a corporation by electing the board of directors, which hires and fires managers. If managers (even a CEO) are unsuccessful in meeting shareholders' goals, they can be ousted. Thus, although management's goals may not always align with shareholders', managers generally act in shareholders' interests.

Source: S. Ross, R. W. Westerfield, and B. D. Jordan, Fundamentals of Corporate Finance (New York: McGraw-Hill/Irwin, 2006), pp. 12–13.